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General Category => Off the Record => Topic started by: jimmy olsen on January 07, 2019, 12:22:45 am

Title: What should the marginal tax rate for income over $10 million be?
Post by: jimmy olsen on January 07, 2019, 12:22:45 am
There's been much talk on this subject by the chattering classes since AOC brought it up.

What say you Languish?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Monoriu on January 07, 2019, 12:44:30 am
If income is above a certain threshold, a flat rate of 15% should apply to all income, and no deductions may apply. 

That's the way Hong Kong does it. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Eddie Teach on January 07, 2019, 12:44:55 am
At the maximum revenue(peak of Laffer curve). My uneducated guess is that's around 2/3.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: dps on January 07, 2019, 01:05:52 am
I more-or-less agree with Mono on this.  If it were up to me, I'd give everyone an exemption of the first $50,000 of their income, and then put a mostly flat rate with no other deductions, exemptions, or credits on personal income above that.  I think you'd need to build in a bit of a progressive rates for incomes just above the $50,000 limit, because you would have some weird incentives if someone with a gross income of $55,000 ended up with an after-tax income less than someone with a gross of $49,000, but otherwise it would be a flat rate.  As for what that rate should be, it should be whatever rate is needed to raise the desired amount of revenue.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Grinning_Colossus on January 07, 2019, 01:09:03 am
Obscenely high top income taxes (90%+), low corporate taxes, no capital gains taxes. Artificial Calvinism.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zanza on January 07, 2019, 03:14:55 am
Whatever level is needed to sustain the average government expenditure over an economic cycle. The discussion should be about what level of government spending society wants. Revenue should follow the targeted spending.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Monoriu on January 07, 2019, 03:32:56 am
It is unhealthy to rely on taxes on the ultra rich to sustain government spending in the long run.  The number of ultra rich people tend to be very small, and their tax contribution fluctuates a lot, particularly during recessions.  It is much more reliable to have a broad tax base. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tyr on January 07, 2019, 05:28:38 am
It is unhealthy to rely on taxes on the ultra rich to sustain government spending in the long run.  The number of ultra rich people tend to be very small, and their tax contribution fluctuates a lot, particularly during recessions.  It is much more reliable to have a broad tax base. 

I'd say quite the opposite.
With increasing automation and the decline of work wealth is ever more falling into the hands of a few people.
It will be necessary for the survival of society to tax these people more to cover the masses of retirees and unemployed the future will bring.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zanza on January 07, 2019, 06:57:04 am
It will become necessary to tax capital in a world where most people cannot compete with robots.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Monoriu on January 07, 2019, 07:21:07 am
Are we dealing with the real world or a hypothetical robot world that has yet to arrive?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Grey Fox on January 07, 2019, 07:28:18 am
70% is a good amount. A better Capital tax is also needed in the USA.

But the real issue is how the state governments & the federal rarely agree on the amount of social netting they should provide.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 07, 2019, 07:49:11 am
If the goal is to maximize sustainable yield I think it's somewhere around 50-60%.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 07, 2019, 08:12:17 am
Are we dealing with the real world or a hypothetical robot world that has yet to arrive?
That world will not arrive tomorrow, with a fanfare.  That world would gradually supplant the world that was there before.  Some may argue that the processed already started decades ago, at least for the unskilled labor.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zanza on January 07, 2019, 09:16:52 am
Are we dealing with the real world or a hypothetical robot world that has yet to arrive?
That world will not arrive tomorrow, with a fanfare.  That world would gradually supplant the world that was there before.  Some may argue that the processed already started decades ago, at least for the unskilled labor.
This. And it is likely to accelerate, especially for white collar jobs. To replace blue collar jobs, you need capital-intensive robots in a factory hall. To replace white-collar jobs, you only need a data centre with server blades somewhere.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 07, 2019, 11:05:56 am
That world will not arrive tomorrow, with a fanfare.  That world would gradually supplant the world that was there before.  Some may argue that the processed already started decades ago, at least for the unskilled labor.

This has been recently the hardest thing to convey to students of history, now. The emphasis, both in scholarly discourse and popular history, on turning points, and revolutions, and decisiveness has strengthened the illusion that change is always extremely apparent to populations and historical actors, and only in those moment, can, and should people actively take sides.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 11:07:56 am
I never understood the leftist obsession with taxation of the rich as an inherent good in and of itself.  People like OAC don't say "we should raise taxes to pay for health care" (indeed she was opposed to the PAYGO rule that would require congress to pay for any increased spending) - rather taxing the rich is a good thing just by itself.

Personally, all taxes should be low enough to pay for all essential government spending, but not a bit more.  What rate that is... depends on what you think essential government spending should be.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 07, 2019, 11:19:27 am
What about the rightist obsession with becoming ultra-rich? I mean, what the fuck could you ethically spend $10 million on?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 11:21:50 am
What about the rightist obsession with becoming ultra-rich? I mean, what the fuck could you ethically spend $10 million on?

What do you mean "ethically" spend?

You could spend it on whatever you want.  Might I remind you of Bill Gates and Warren Buffet, donating billions to reduce poverty worldwide. 

But more generally - who are you to tell someone what they can or can't spend their money on?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 07, 2019, 11:24:07 am
What do you mean "ethically" spend?

Spend without causing undue damage to the environment or other people.

You could spend it on whatever you want.  Might I remind you of Bill Gates and Warren Buffet, donating billions to reduce poverty worldwide. 

So they should have no problem being taxed for the same purpose?

But more generally - who are you to tell someone what they can or can't spend their money on?

I'm not telling anyone anything, I'm just asking a question.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: garbon on January 07, 2019, 11:34:06 am
So they should have no problem being taxed for the same purpose?

Only if you assume the government is just as efficient in such dispersal. I'm not sure I even agree with that assumption.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 07, 2019, 11:37:05 am
So they should have no problem being taxed for the same purpose?

Only if you assume the government is just as efficient in such dispersal. I'm not sure I even agree with that assumption.

I'd argue working governments are usually more efficient at dispersing welfare to their citizens than private charities handing out stuff. Governments tend to have a more encompassing reach, for one.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 11:41:57 am
So they should have no problem being taxed for the same purpose?

Only if you assume the government is just as efficient in such dispersal. I'm not sure I even agree with that assumption.

I'd argue working governments are usually more efficient at dispersing welfare to their citizens than private charities handing out stuff. Governments tend to have a more encompassing reach, for one.

Maybe in general, but I specifically picked the Bill and Melinda Gates Foundation.  No way if they turned their $50B endowment over to the US Federal Government would it be spent on assisting the poorest of the poor in Africa and around the world.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 07, 2019, 11:44:18 am
So they should have no problem being taxed for the same purpose?

Only if you assume the government is just as efficient in such dispersal. I'm not sure I even agree with that assumption.

I'd argue working governments are usually more efficient at dispersing welfare to their citizens than private charities handing out stuff. Governments tend to have a more encompassing reach, for one.

Maybe in general, but I specifically picked the Bill and Melinda Gates Foundation.  No way if they turned their $50B endowment over to the US Federal Government would it be spent on assisting the poorest of the poor in Africa and around the world.

Okay, so you've given me two examples of the ultra-rich genuinely helping. I could likely find (with time, so I'm not going to) two hundred examples of the ultra-rich fucking over other people with their wealth.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 12:08:27 pm
Okay, so you've given me two examples of the ultra-rich genuinely helping. I could likely find (with time, so I'm not going to) two hundred examples of the ultra-rich fucking over other people with their wealth.

I don't know you're going to find two hundred examples of "the ultra rich fucking over other people with their wealth" though. :huh:

Do people use their wealth in silly, ostentatious, and generally much less noble than the Gates?  Absolutely.  But just because someone wants to build a monstrous nine-figure mega yacht, or has a ridiculous  car collection they never drive, or mansions on each continent, doesn't mean they're fucking anyone else over.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 07, 2019, 12:15:28 pm
Okay, so you've given me two examples of the ultra-rich genuinely helping. I could likely find (with time, so I'm not going to) two hundred examples of the ultra-rich fucking over other people with their wealth.

I don't know you're going to find two hundred examples of "the ultra rich fucking over other people with their wealth" though. :huh:

Do people use their wealth in silly, ostentatious, and generally much less noble than the Gates?  Absolutely.  But just because someone wants to build a monstrous nine-figure mega yacht, or has a ridiculous  car collection they never drive, or mansions on each continent, doesn't mean they're fucking anyone else over.

They pretty much are, given that instead of buying crap that they never use (and often fucking over the environment in the process as well), the money could be used in ways much more beneficial to a greater number of people. Hence the taxation.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 07, 2019, 12:16:11 pm
Do people use their wealth in silly, ostentatious, and generally much less noble than the Gates?  Absolutely.  But just because someone wants to build a monstrous nine-figure mega yacht, or has a ridiculous  car collection they never drive, or mansions on each continent, doesn't mean they're fucking anyone else over.

Individually no but collectively maybe.
If the ultra-rich as a group use their wealth systematically to distort and bias political outcomes to their favor then it's a big problem.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tyr on January 07, 2019, 12:18:22 pm
I never understood the leftist obsession with taxation of the rich as an inherent good in and of itself.  People like OAC don't say "we should raise taxes to pay for health care" (indeed she was opposed to the PAYGO rule that would require congress to pay for any increased spending) - rather taxing the rich is a good thing just by itself.

Personally, all taxes should be low enough to pay for all essential government spending, but not a bit more.  What rate that is... depends on what you think essential government spending should be.

I thought the right wing criticism of leftists was the opposite?
That we talked about big spending projects without a way to fund them.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 12:21:42 pm
Do people use their wealth in silly, ostentatious, and generally much less noble than the Gates?  Absolutely.  But just because someone wants to build a monstrous nine-figure mega yacht, or has a ridiculous  car collection they never drive, or mansions on each continent, doesn't mean they're fucking anyone else over.

Individually no but collectively maybe.
If the ultra-rich as a group use their wealth systematically to distort and bias political outcomes to their favor then it's a big problem.

That's more an issue of campaign finance reform, than a critique of income inequality in general.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Brain on January 07, 2019, 01:22:47 pm
With the greatly expanded states of the last century or two I think the problem of the overmighty subject is smaller than it was. In modern non-tiny industrialized countries even ultra-rich individuals command economic resources that are puny compared to the government.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Brain on January 07, 2019, 01:28:42 pm
The US government is a better investor than Warren Buffett. It is known.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 07, 2019, 01:37:40 pm
That's more an issue of campaign finance reform, than a critique of income inequality in general.

Because the Supreme Court constitutionalized the right to legalized bribery, effective campaign finance reform is not possible in the US.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 07, 2019, 01:49:17 pm
I never understood the leftist obsession with taxation of the rich as an inherent good in and of itself.

Because it speaks of the general conception of citizenry, and of the idea that gathering wealth for wealth's sake ought not to be a laudable goal. It's a clumsy political stance. There was a time when conservatives also agreed on the need for a moral end to citizenry, even if they disagreed on what that end was. Citizenship used to be conceived as the capacity for citizens to make defensible claims upon the lives of other fellow citizens. It's only relatively recently that citizenship became reduced to indifference towards fellow citizens. It had some advantages: this has paved the way for a considerable extension of individual civic rights. But it has impoverished our conception of politics, and democracy.

It is of course perfectly possible to speak of taxation as simply the gathering of resources, but as you and others have noted, it simply amounts to deferring the moral discussion to the question of uses of resources. This was a strategy that used to be politically appealing, because it makes taxation a matter of high technicality (and therefore limiting it to an enlightened public), but I think we are now seeing the limits of this sort of reduction of politics to management.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 07, 2019, 02:30:31 pm
They pretty much are, given that instead of buying crap that they never use (and often fucking over the environment in the process as well), the money could be used in ways much more beneficial to a greater number of people. Hence the taxation.

You have an odd conception of what fucking someone over entails.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 02:36:23 pm
I never understood the leftist obsession with taxation of the rich as an inherent good in and of itself.

Because it speaks of the general conception of citizenry, and of the idea that gathering wealth for wealth's sake ought not to be a laudable goal. It's a clumsy political stance. There was a time when conservatives also agreed on the need for a moral end to citizenry, even if they disagreed on what that end was. Citizenship used to be conceived as the capacity for citizens to make defensible claims upon the lives of other fellow citizens. It's only relatively recently that citizenship became reduced to indifference towards fellow citizens. It had some advantages: this has paved the way for a considerable extension of individual civic rights. But it has impoverished our conception of politics, and democracy.

It is of course perfectly possible to speak of taxation as simply the gathering of resources, but as you and others have noted, it simply amounts to deferring the moral discussion to the question of uses of resources. This was a strategy that used to be politically appealing, because it makes taxation a matter of high technicality (and therefore limiting it to an enlightened public), but I think we are now seeing the limits of this sort of reduction of politics to management.

When was gathering wealth "not [a] laudable goal"?  Gathering wealth has been celebrated through human history.

I don't think the political right has ever argued that citizenship doesn't entail duties towards our fellow citizens and members of the community.  Indeed it's conservatives that tend to stress such connections, while pointing out that such obligations and responsibilities need not involve the government.

But I simply can't agree that taking wealth from an individual, and transferring it to the state without their consent, is anything but an evil.  It may well be a necessary evil.  But why it should be celebrated as a good in and of itself seems to come from nothing more than envy.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 07, 2019, 02:56:37 pm
On most measures of income or wealth inequality, the US is around where it was during the Gilded Age.  That is not healthy situation for a mass democracy.


Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 07, 2019, 03:02:21 pm
When was gathering wealth "not [a] laudable goal"?  Gathering wealth has been celebrated through human history.

This is not quite what I wrote: I sought to answer your question as to why leftists focus on the transfer of wealth less as a technical matter, and more as a moral-political stance. It's no less goal-oriented. It's just that the goal is the moral message more than the acquisition of resources.

But to address your tangent, gathering wealth has been celebrated only in certain circumstances, and in certain polities, through human history. Aboriginal polities, and societies of consensus developed numerous techniques to prevent accumulation. Mesopotamian, and South Asian temples gathered gold as repayment for the debt incurred towards the gods. Medieval nobility disdained wealth for wealth's sake - it was political power and existence they were after. All of these came with considerable political cultures aimed at ascribing the proper place of wealth, with considerable shaming and corrective measures for straying members of these societies. Only recently has the acquisition of wealth for no other reason than wealth itself been praised as acceptable, and any other prescriptive discourse been denounced as meddling.

Quote
I don't think the political right has ever argued that citizenship doesn't entail duties towards our fellow citizens and members of the community.  Indeed it's conservatives that tend to stress such connections, while pointing out that such obligations and responsibilities need not involve the government.

I think there are still some conservatives who do believe that - like you, for instance. :) But the right has now to contend with the considerable growth in importance to its "pro-business/anti-regulation" stance, that tends to trump any discussion of the common good, or any place for the government (except through militarism). Much like the left has had to contend with the dynamism of its "judicial activism" aspect, that has treated the common good as if it went without saying.

Quote
But I simply can't agree that taking wealth from an individual, and transferring it to the state without their consent, is anything but an evil.  It may well be a necessary evil.  But why it should be celebrated as a good in and of itself seems to come from nothing more than envy.

And this is why we disagree politically - and that's fine. :) I just can't agree that an individual's wealth is the sole product of their own merit or labor that they should be the only one having a claim over it. Especially if that wealth is allowed to distort the other cornerstones of democratic equality.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 07, 2019, 03:31:11 pm
Medieval nobility disdained wealth for wealth's sake - it was political power and existence they were after.

Seems to me the #1 driver of medieval noble activity was the enlargement of their land.  I.e. wealth.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 07, 2019, 03:41:38 pm
Seems to me the #1 driver of medieval noble activity was the enlargement of their land.  I.e. wealth.

Not really. It was the replication, through time, of a relationship of domination that gave them their purpose. Land provided basis for that specific preoccupation for power. If enlargement of their land, and the growth of their wealth was really what mattered, you end up with a lot of decisions that make no sense, and seem to run counter to what we would expect. You also have to explain away why the property regime of most of medieval Europe seem to hinder so much the acquisition of wealth. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 07, 2019, 03:47:33 pm
I don't think the political right has ever argued that citizenship doesn't entail duties towards our fellow citizens and members of the community.  Indeed it's conservatives that tend to stress such connections, while pointing out that such obligations and responsibilities need not involve the government.

How would such obligations be enforced without the government?

But I simply can't agree that taking wealth from an individual, and transferring it to the state without their consent, is anything but an evil.  It may well be a necessary evil.  But why it should be celebrated as a good in and of itself seems to come from nothing more than envy.

Some of us are actually happy to help support our fellow citizens who require such support from the state. It's called human empathy. And the idea that by supporting the weaker we become stronger as a society.

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: dps on January 07, 2019, 03:52:40 pm
I don't think the political right has ever argued that citizenship doesn't entail duties towards our fellow citizens and members of the community.  Indeed it's conservatives that tend to stress such connections, while pointing out that such obligations and responsibilities need not involve the government.

How would such obligations be enforced without the government?

But I simply can't agree that taking wealth from an individual, and transferring it to the state without their consent, is anything but an evil.  It may well be a necessary evil.  But why it should be celebrated as a good in and of itself seems to come from nothing more than envy.

Some of us are actually happy to help support our fellow citizens who require such support from the state. It's called human empathy. And the idea that by supporting the weaker we become stronger as a society.



I think you just answered your own question.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 04:00:53 pm
I don't think the political right has ever argued that citizenship doesn't entail duties towards our fellow citizens and members of the community.  Indeed it's conservatives that tend to stress such connections, while pointing out that such obligations and responsibilities need not involve the government.

How would such obligations be enforced without the government?

Why do such obligations have to be enforced?

https://www.unitedway.org/
https://www.salvationarmy.org/ihq/usanational
https://www.scouting.org/
https://www.icrc.org/en
https://www.doctorswithoutborders.org/
https://www.worldwildlife.org/

Just to name a few...
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Grey Fox on January 07, 2019, 04:06:10 pm
Okay, so you've given me two examples of the ultra-rich genuinely helping. I could likely find (with time, so I'm not going to) two hundred examples of the ultra-rich fucking over other people with their wealth.

I don't know you're going to find two hundred examples of "the ultra rich fucking over other people with their wealth" though. :huh:

Do people use their wealth in silly, ostentatious, and generally much less noble than the Gates?  Absolutely.  But just because someone wants to build a monstrous nine-figure mega yacht, or has a ridiculous  car collection they never drive, or mansions on each continent, doesn't mean they're fucking anyone else over.

But they are, that's what capitalism is.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 04:10:21 pm
Okay, so you've given me two examples of the ultra-rich genuinely helping. I could likely find (with time, so I'm not going to) two hundred examples of the ultra-rich fucking over other people with their wealth.

I don't know you're going to find two hundred examples of "the ultra rich fucking over other people with their wealth" though. :huh:

Do people use their wealth in silly, ostentatious, and generally much less noble than the Gates?  Absolutely.  But just because someone wants to build a monstrous nine-figure mega yacht, or has a ridiculous  car collection they never drive, or mansions on each continent, doesn't mean they're fucking anyone else over.

But they are, that's what capitalism is.

You're just begging the question by saying "capitalism = fucking people over".

What makes it so?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Grey Fox on January 07, 2019, 04:15:09 pm
Okay, so you've given me two examples of the ultra-rich genuinely helping. I could likely find (with time, so I'm not going to) two hundred examples of the ultra-rich fucking over other people with their wealth.

I don't know you're going to find two hundred examples of "the ultra rich fucking over other people with their wealth" though. :huh:

Do people use their wealth in silly, ostentatious, and generally much less noble than the Gates?  Absolutely.  But just because someone wants to build a monstrous nine-figure mega yacht, or has a ridiculous  car collection they never drive, or mansions on each continent, doesn't mean they're fucking anyone else over.

But they are, that's what capitalism is.

You're just begging the question by saying "capitalism = fucking people over".

What makes it so?

The inherent need of it to create profit.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: frunk on January 07, 2019, 04:17:10 pm
Why do such obligations have to be enforced?

https://www.unitedway.org/
https://www.salvationarmy.org/ihq/usanational
https://www.scouting.org/
https://www.icrc.org/en
https://www.doctorswithoutborders.org/
https://www.worldwildlife.org/

Just to name a few...

Because such charities can be good at addressing specific problems, but are bad at dealing with general societal ills.  Take the tendency of charitable contributions spiking in response to specific tragedies.  Not particularly useful for longer term or widespread issues that aren't responsive to bursts of periodic spending.

It also doesn't help that charitable giving tends to decline when the economy goes south, which is exactly the point when it is needed more.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 04:19:46 pm
Why do such obligations have to be enforced?

https://www.unitedway.org/
https://www.salvationarmy.org/ihq/usanational
https://www.scouting.org/
https://www.icrc.org/en
https://www.doctorswithoutborders.org/
https://www.worldwildlife.org/

Just to name a few...

Because such charities can be good at addressing specific problems, but are bad at dealing with general societal ills.  Take the tendency of charitable contributions spiking in response to specific tragedies.  Not particularly useful for longer term or widespread issues that aren't responsive to bursts of periodic spending.

It also doesn't help that charitable giving tends to decline when the economy goes south, which is exactly the point when it is needed more.

I'm not saying abolish government.  I was merely pointing out how people and communities can look out for each other without being coerced by the government to do so.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: frunk on January 07, 2019, 04:27:26 pm
I'm not saying abolish government.  I was merely pointing out how people and communities can look out for each other without being coerced by the government to do so.

You'll have to explain again to me how saying obligations should not be enforced means that it is ok for the government to do charitable things.  Aren't you arguing that taxation is a necessary evil and it shouldn't be used for charity?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 04:31:58 pm
Quote from: Barrister
I don't think the political right has ever argued that citizenship doesn't entail duties towards our fellow citizens and members of the community.  Indeed it's conservatives that tend to stress such connections, while pointing out that such obligations and responsibilities need not involve the government.

But I simply can't agree that taking wealth from an individual, and transferring it to the state without their consent, is anything but an evil.  It may well be a necessary evil.  But why it should be celebrated as a good in and of itself seems to come from nothing more than envy.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: frunk on January 07, 2019, 04:37:48 pm
Indeed it's conservatives that tend to stress such connections, while pointing out that such obligations and responsibilities need not involve the government.

Has anybody claimed there shouldn't be private charity?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 07, 2019, 05:21:33 pm
The inherent need of it to create profit.

Presumably the people who are being fucked over by capitalism are the ones who voluntarily purchased a good or service, presumably improving the quality of their lives in the process, and the ones who voluntarily contracted their labor to produce that good or service, also presumably improving their lives in the process?

And by extension if that good or service had never been produced, and that job created, no one would have been fucked over, and the world would be a much better place?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 07, 2019, 05:24:40 pm
Presumably the people who are being fucked over by capitalism are the ones who voluntarily purchased a good or service, presumably improving the quality of their lives in the process, and the ones who voluntarily contracted their labor to produce that good or service, also presumably improving their lives in the process?

Nah, they are the people who have to purchase inferior crap because they cannot afford anything better, because capitalism puts every effort into not paying them a living wage. They of course do this "voluntarily" because obviously they are on equal footing in negotiating with employers.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 07, 2019, 05:36:38 pm
Nah, they are the people who have to purchase inferior crap because they cannot afford anything better, because capitalism puts every effort into not paying them a living wage. They of course do this "voluntarily" because obviously they are on equal footing in negotiating with employers.

Sounds to me like you're saying anyone who wants more is being fucked over.  Which I figure is just about everyone, except maybe those 20 hippies living in a yurt in Oregon.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: jimmy olsen on January 07, 2019, 05:42:39 pm
I never understood the leftist obsession with taxation of the rich as an inherent good in and of itself.  People like OAC don't say "we should raise taxes to pay for health care" (indeed she was opposed to the PAYGO rule that would require congress to pay for any increased spending) - rather taxing the rich is a good thing just by itself.

Personally, all taxes should be low enough to pay for all essential government spending, but not a bit more.  What rate that is... depends on what you think essential government spending should be.

Decreasing income inequality and increasing social mobility are certainly societal goods that would be advanced by higher taxes on the rich.

However, AOC's main policy goal, is certainly the passing of Medicare For All style universal health care bill.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 07, 2019, 06:58:55 pm
I never understood the leftist obsession with taxation of the rich as an inherent good in and of itself.  People like OAC don't say "we should raise taxes to pay for health care" (indeed she was opposed to the PAYGO rule that would require congress to pay for any increased spending) - rather taxing the rich is a good thing just by itself.

Personally, all taxes should be low enough to pay for all essential government spending, but not a bit more.  What rate that is... depends on what you think essential government spending should be.
It's harder to understand things if you already brand them as obsession.  The general thought process is that money is power, and also money tends to disproportionally gravitate towards those who already have money.  Without a counter-balancing force such as a tax system that is sufficiently progressive, you will have an unbalanced system that would concentrate more and more power in less and less hands over time.  Once that power gets concentrated enough, it is used to entrench and concentrate itself even further, and you transition from democracy to oligarchy.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 07, 2019, 07:00:54 pm
So they should have no problem being taxed for the same purpose?

Only if you assume the government is just as efficient in such dispersal. I'm not sure I even agree with that assumption.
I wouldn't agree either, it's probably more efficient, at least if you live in a democratic country where the government isn't intentionally sabotaged all the time.  There are some things that even the most efficient and well-managed charities just can't accomplish, due to lacking non-monetary power.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zoupa on January 07, 2019, 07:10:56 pm
Isn't BB a government employee?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 07, 2019, 07:17:28 pm
Isn't BB a government employee?

And?

I'm no libertarian.  Government certainly has a role to play (in particular in criminal justice).
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on January 07, 2019, 08:02:38 pm
If the goal is to maximize sustainable yield I think it's somewhere around 50-60%.

Actually more like 73%, at least according to a piece in the New York Times

Quote
Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio-cortez-tax-policy-dance.html


@BB, you sound like a free man on the land loony when you talk about taxation as evil. 

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Monoriu on January 08, 2019, 12:01:47 am
I have no idea why the tax rate should be set at a level that yields the maximum amount of funding.  Governments are not here to make as much money as possible.  That's the job of corporations.  Governments provide essential services to the people that cannot reasonably or efficiently be provided by the market.  Taxes are a necessary evil that support such services. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zoupa on January 08, 2019, 12:19:17 am
Isn't BB a government employee?

And?

I'm no libertarian.  Government certainly has a role to play (in particular in criminal justice).

It's ironic to hear you say taxation is theft considering you wouldn't have a job without that theft.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Valmy on January 08, 2019, 12:30:14 am
I am not sure what to make of BB presenting his utopian anarchism as some sort of conservative position :hmm:

I mean yeah BB it would be great if all men were angels. Then we would all live in anarchist communes and nobody would be poor ever again.

Quote
It's ironic to hear you say taxation is theft considering you wouldn't have a job without that theft.

Or that a prosecutor would be so against coercion and call it evil. Did Stefan Molyneux hijack his account or something?

People will sit by and watch others starve. They just will, and have for thousands of years. So we need the state to step in make sure people are not in such horrid shape that the fabric of society starts to unwind. Pretty much the exact same reason we have laws that need to be enforced. People will break social expectations so we need coercion if we are all going to live together. I mean you try running any sort of group of people trying to achieve a goal where it is all based on the goodness of people's hearts. I mean it is possible, barely, under the best of circumstances.

I have no idea why the tax rate should be set at a level that yields the maximum amount of funding.  Governments are not here to make as much money as possible.  That's the job of corporations.  Governments provide essential services to the people that cannot reasonably or efficiently be provided by the market.  Taxes are a necessary evil that support such services. 

Correct. The job of the tax rate is to get as much money as is needed for the government to fund the services it needs to provide. So I guess my answer to this question would be: whatever is required for the government to fund itself.

And taxes are not evil, they are entirely morally neutral.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zanza on January 08, 2019, 04:42:25 am
A bit related to Barrister's views: In Germany, and also some other continental countries, conservative parties often go with "Christian" and obviously a good Christian "renders unto Caesar the thing's that are Caesars" and sees a moral obligation of society to care for the weak and needy. So the libertarian low tax, small state stance from Thatcherism was never more than a fringe position here, the Conservatives are broadly in favour of the social state. After all, it was originally introduced by arch-conservative Otto von Bismarck and then established by Adenauer and Erhard in West Germany.

When proposing to leave welfare to private charities like BB does, it suggests that we do not trust our democratically legitimated state to administer it. This kind of distrust in state institutions that has been propagated by the American GOP and to a lesser degree by British Tories, is alien to most Conservatives here. They shaped the state and its institutions after all and can influence it much more directly from democratic legislative chambers than they ever could with private institutions.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 08, 2019, 05:10:22 am
In practice, punitive taxes on the super-rich are nothing more than satisfying the bitter envy of a part of the electorate. That's because there's not a lot of those super-rich and they have the means to avoid said taxes, so I am highly skeptical that such taxes can ever amount to any meaningful change in a state's budget.

Also, in terms of taxation and state involvement in wealth redistribution/creation should depend on the balance of two factors:
-efficiency
-personal freedom

Where the sweet spot lies is different for each society I think and it is a moving target as society changes. A high redistribution system like the Scandinavian ones allegedly are, need a high level of social cohesion or they end up being far worse than the ailments they wanted to fix. That's because you need people to actually susbscribe to and adhere by the spirit of which such a system was created for. Otherwise it becomes a highly ineffective system rampant with waste.

And the above is just assuming an earnest attempt at creating something fair, and not simply the creation of a modern feudal system like the socialist countries were, where "redistribution" was simply a way to create a new elite that would gain and keep power by controlling the economy.

All in all, as with nearly all things you can find the ideal balance somewhere in the middle.

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 08, 2019, 07:06:16 am
When proposing to leave welfare to private charities like BB does, it suggests that we do not trust our democratically legitimated state to administer it. This kind of distrust in state institutions that has been propagated by the American GOP and to a lesser degree by British Tories, is alien to most Conservatives here. They shaped the state and its institutions after all and can influence it much more directly from democratic legislative chambers than they ever could with private institutions.
It is amazing how it entered societal conscience as a given that government is not to be trusted, and it even crosses the party lines.  To not share that belief makes you appear naive and brainwashed, whereas in reality a much stronger argument could be made that the cynicism of the opposite belief is the product of highly successful brainwashing.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: garbon on January 08, 2019, 07:09:46 am
Well while not directly connected to modern occurrence, American has a history of government distrust.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Threviel on January 08, 2019, 08:14:14 am
I never understood the leftist obsession with taxation of the rich as an inherent good in and of itself.  People like OAC don't say "we should raise taxes to pay for health care" (indeed she was opposed to the PAYGO rule that would require congress to pay for any increased spending) - rather taxing the rich is a good thing just by itself.

Personally, all taxes should be low enough to pay for all essential government spending, but not a bit more.  What rate that is... depends on what you think essential government spending should be.

I have read some research into happiness that implies that the happiest societies are the most equal societies. Once you have a nice home, a car and a huge TV the second huge TV doesn't add very much happiness. But seeing your neighbour having two TVs causes unhappiness. Very simplistic.

So taxing the rich in order to get a more equal society might in fact be a good thing all on its own. From an ethical standpoint it might be despicable, but from a practical standpoint it might be good.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 08, 2019, 08:15:21 am
Well while not directly connected to modern occurrence, American has a history of government distrust.
There is a lot of gradation between skepticism and conspiracy theorism.  Saying that there is a history of always being somewhere on the spectrum isn't really saying a whole lot. 

The degree to which people have been conditioned to distrust the US government is unprecedented, and ultimately catastrophically damaging.  The quality of governance is what ultimately differentiates a country that most want to live in from a country that most want to leave at the first opportunity.  You can't have quality governance when the entity enforcing it is regarded as a cancer that needs to be fought at all costs.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on January 08, 2019, 08:27:23 am
I'm sure you'll get rid of the government soon enough after Trump declares a national state of emergency. Then all the libertarians and Barrister-conservatives can rejoice that there will be no more evil government collecting taxes from them. :ph34r:
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Valmy on January 08, 2019, 08:28:43 am
There is a lot of gradation between skepticism and conspiracy theorism.

Yeah one should be skeptical of the state and hold it accountable. But some people take this waaaay too far. Like there can only be two settings an institution can have: Good/Evil.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 08, 2019, 08:45:43 am
There is a lot of gradation between skepticism and conspiracy theorism.

Yeah one should be skeptical of the state and hold it accountable. But some people take this waaaay too far. Like there can only be two settings an institution can have: Good/Evil.

Exactly, but DorseyGuller was on the other end of that above. How anyone from the Ukraine can be puzzled by lack of trust in government? No person from Eastern Europe would be puzzled by that.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: FunkMonk on January 08, 2019, 08:49:53 am
There is a lot of gradation between skepticism and conspiracy theorism.

Yeah one should be skeptical of the state and hold it accountable. But some people take this waaaay too far. Like there can only be two settings an institution can have: Good/Evil.

Actually, it's simpler than that now:

The Government is Good when my party is in power and Evil when it is not.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 08, 2019, 08:55:40 am
There is a lot of gradation between skepticism and conspiracy theorism.

Yeah one should be skeptical of the state and hold it accountable. But some people take this waaaay too far. Like there can only be two settings an institution can have: Good/Evil.

Actually, it's simpler than that now:

The Government is Good when my party is in power and Evil when it is not.

You have to admit, that's a convenient, easy to follow system.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 08, 2019, 09:47:21 am
There is a lot of gradation between skepticism and conspiracy theorism.

Yeah one should be skeptical of the state and hold it accountable. But some people take this waaaay too far. Like there can only be two settings an institution can have: Good/Evil.

Exactly, but DorseyGuller was on the other end of that above. How anyone from the Ukraine can be puzzled by lack of trust in government? No person from Eastern Europe would be puzzled by that.
I think Hungarians are giving Eastern Europe a bad rep.  Some of us are capable of judging different entities on their individual merits.  I think it’s perfectly reasonable to have different levels of trust in the governments of different countries.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 08, 2019, 09:49:52 am
There is a lot of gradation between skepticism and conspiracy theorism.

Yeah one should be skeptical of the state and hold it accountable. But some people take this waaaay too far. Like there can only be two settings an institution can have: Good/Evil.

Exactly, but DorseyGuller was on the other end of that above. How anyone from the Ukraine can be puzzled by lack of trust in government? No person from Eastern Europe would be puzzled by that.
I think Hungarians are giving Eastern Europe a bad rep.  Some of us are capable of judging different entities on their individual merits.  I think it’s perfectly reasonable to have different levels of trust in the governments of different countries.

You were speaking in general terms though, not about a specific government.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 08, 2019, 09:52:17 am
There is a lot of gradation between skepticism and conspiracy theorism.

Yeah one should be skeptical of the state and hold it accountable. But some people take this waaaay too far. Like there can only be two settings an institution can have: Good/Evil.

Exactly, but DorseyGuller was on the other end of that above. How anyone from the Ukraine can be puzzled by lack of trust in government? No person from Eastern Europe would be puzzled by that.
I think Hungarians are giving Eastern Europe a bad rep.  Some of us are capable of judging different entities on their individual merits.  I think it’s perfectly reasonable to have different levels of trust in the governments of different countries.

You were speaking in general terms though, not about a specific government.
Is every government in the world a US government?  I don’t subscribe to that world view.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 08, 2019, 10:05:12 am
Did you just edit that "US" there? I think you did.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 08, 2019, 10:17:13 am
Did you just edit that "US" there? I think you did.
I did not.  You just read what you wanted to read, because for some reason you just have to hit your quota of attacking my intelligence and integrity.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Brain on January 08, 2019, 10:27:01 am
There are many reasons why people hate their betters and want them to pay for everyone. There's your basic spite, which in itself explains pretty much everything that's wrong with humanity. There's envy. There's greed.

In a society that bends over forwards to make sure everyone gets stuff without having to make any effort (like Sweden) I have little sympathy for people who are too lazy to get a decent education (the low-risk way to avoid being poor) and still whine about other people being more successful.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Benedict Arnold on January 08, 2019, 01:44:04 pm
A decent education is by no means a guarantee of anything in the United States aside from crazy student loan debt.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: derspiess on January 08, 2019, 02:09:19 pm
Crazy student loan debt is not guaranteed if you play your cards right. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Habbaku on January 08, 2019, 02:10:15 pm
Talking about things like guarantees, one way or the other, isn't useful.

Getting a decent education in the USA remains one of the strongest means of ensuring a citizen doesn't fall into poverty. There's no guarantee of it, but whining about a lack of guarantee is pointless.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 08, 2019, 02:21:34 pm
A decent education is by no means a guarantee of anything in the United States aside from crazy student loan debt.
Nothing is a guarantee.  Shit can happen to everyone.  Getting a useful degree certainly helps your odds. 

However, what helps your odds in getting a useful degree is getting a fair shot at getting good secondary education.  If you live in Sweden, your odds are good, thanks to social democrats.  In the US, however, it depends a lot more on the circumstances to which you were born.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Valmy on January 08, 2019, 02:37:01 pm
A decent education is by no means a guarantee of anything in the United States aside from crazy student loan debt.

Community/Junior College plus two years of State U can help that. I mean you will have debt but more like car note debt and less like a mortgage.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Habbaku on January 08, 2019, 02:49:34 pm
A decent education is by no means a guarantee of anything in the United States aside from crazy student loan debt.
Nothing is a guarantee.  Shit can happen to everyone.  Getting a useful degree certainly helps your odds. 

However, what helps your odds in getting a useful degree is getting a fair shot at getting good secondary education.  If you live in Sweden, your odds are good, thanks to social democrats.  In the US, however, it depends a lot more on the circumstances to which you were born.

:yes:
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 08, 2019, 04:40:15 pm
Much like free speech, social democracy is not for ultra virtuous ascetic people, and to be denied based on merit. It’s for mitigating the shittiy decisions that disadvantaged people can take, and for which the repercussions will be much more severe than they could be for rich people, or genius people, or people who happen to have great skills that are in demand right now.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 08, 2019, 11:36:08 pm
There's been much talk on this subject by the chattering classes since AOC brought it up.

What say you Languish?
I'd need to reflect more on this.  Read more.

70% above 10M$ does not seem utterly bad and chaos bringing.

I read an argument that it makes a society more productive because high paying executives tend to forgo higher wages/compensation and leave the capital where it needs to be (in the company, so they could invest it and produce growth) when they know the next million is going to be taxed at 70%.

But it seems very simplistic, and does not seem to take creative fiscality into account, and other should-be-taxed-but-are-not priviledges.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 08, 2019, 11:38:22 pm
Much like free speech, social democracy is not for ultra virtuous ascetic people, and to be denied based on merit. It’s for mitigating the shittiy decisions that disadvantaged people can take, and for which the repercussions will be much more severe than they could be for rich people, or genius people, or people who happen to have great skills that are in demand right now.
Then how will they learn their decisions are shitty if they never pay any price for it?

You could eliminate all jail time too, since it's harder for poor people who can't pay protection while inside, or can't negotiated a plea deal that involves a better jail and or a reduced sentence.

That would make it allright to all the poor people who make shitty decisions.  Might not be so great to all the poor people who can't afford extra security.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Eddie Teach on January 09, 2019, 12:23:34 am
Perhaps the lack of material goods and self respect is enough of a price, we don't need to be starving and homeless.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Syt on January 09, 2019, 01:12:22 am
Much like free speech, social democracy is not for ultra virtuous ascetic people, and to be denied based on merit. It’s for mitigating the shittiy decisions that disadvantaged people can take, and for which the repercussions will be much more severe than they could be for rich people, or genius people, or people who happen to have great skills that are in demand right now.
Then how will they learn their decisions are shitty if they never pay any price for it?

Well, for one - there's signs that being poor affects your decision making abilities, so aiding them might be more useful than simply going, "Well, that sucker needs to learn a lesson!"

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5167530/
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zoupa on January 09, 2019, 01:39:22 am
There are many reasons why people hate their betters

Their betters  :lol:
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 09, 2019, 02:34:49 am
A decent education is by no means a guarantee of anything in the United States aside from crazy student loan debt.
Nothing is a guarantee.  Shit can happen to everyone.  Getting a useful degree certainly helps your odds. 

However, what helps your odds in getting a useful degree is getting a fair shot at getting good secondary education.  If you live in Sweden, your odds are good, thanks to social democrats.  In the US, however, it depends a lot more on the circumstances to which you were born.

Agreed.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Syt on January 09, 2019, 02:39:05 am
Not only in the US. Studies show that e.g. in Germany children of academics are much more likely to go to university than children from non-academic households - 83% vs 23%. And going to university is significantly cheaper in Germany than in the US.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 09, 2019, 02:40:21 am
Much like free speech, social democracy is not for ultra virtuous ascetic people, and to be denied based on merit. It’s for mitigating the shittiy decisions that disadvantaged people can take, and for which the repercussions will be much more severe than they could be for rich people, or genius people, or people who happen to have great skills that are in demand right now.
Then how will they learn their decisions are shitty if they never pay any price for it?

Well, for one - there's signs that being poor affects your decision making abilities, so aiding them might be more useful than simply going, "Well, that sucker needs to learn a lesson!"

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5167530/

If you look at history, the key difference for successful countries is that they had a strong middle class and it (or the upper echelons of it) were in power or shared in the power.  The general goal should be to ensure such a strong middle class forms and/or maintains. Education is a massive part of it, and well done programs to help the disadvantaged can help as well, I am sure.

The problem is that the those aid programs (welfare) when overdone can be an unnecessary burden on the middle class and a system that while helps the subsistence of the poor it also keeps them on that level.  And this is, BTW, a perfectly good solution for the upper class, as using the middle class' resources to placate the lower one is a very neat: it diminishes the middle's chances of posing a challenge to their rule, and keeps the lower class' unrest at a managable level as well.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 09, 2019, 08:31:38 am
The middle class in America has not been hollowed out because of the fiscal burden of the welfare state. It has been hollowed out because: (1) for several decades all the benefits of economic growth went to the top decile of income earners (and most of that to the top 1%) while median wages stagnated, and (2) the labor share of national income in its entirety went steadily down.

Those are the facts that have to addressed if your concern is the viability of the middle class, at least in the USA.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on January 09, 2019, 08:31:55 am
Much like free speech, social democracy is not for ultra virtuous ascetic people, and to be denied based on merit. It’s for mitigating the shittiy decisions that disadvantaged people can take, and for which the repercussions will be much more severe than they could be for rich people, or genius people, or people who happen to have great skills that are in demand right now.
Then how will they learn their decisions are shitty if they never pay any price for it?

You could eliminate all jail time too, since it's harder for poor people who can't pay protection while inside, or can't negotiated a plea deal that involves a better jail and or a reduced sentence.

That would make it allright to all the poor people who make shitty decisions.  Might not be so great to all the poor people who can't afford extra security.

Why are you concerned that a poor person pay a price but not so concerned that a rich person does not pay a price which is equally devastating to them?

If you want to be the supreme disciplinarian then have a progressive tax rate that makes shitty decisions equally painful.

If you look at history, the key difference for successful countries is that they had a strong middle class and it (or the upper echelons of it) were in power or shared in the power.  The general goal should be to ensure such a strong middle class forms and/or maintains. Education is a massive part of it, and well done programs to help the disadvantaged can help as well, I am sure.

The problem is that the those aid programs (welfare) when overdone can be an unnecessary burden on the middle class and a system that while helps the subsistence of the poor it also keeps them on that level.  And this is, BTW, a perfectly good solution for the upper class, as using the middle class' resources to placate the lower one is a very neat: it diminishes the middle's chances of posing a challenge to their rule, and keeps the lower class' unrest at a managable level as well.

Is your argument that countries that have generous social assistance programs (say like universal health care) don't have a vibrant middle class?  If so, I ask that you do two things.  First, provide some evidence to support that statement.  Second, explain the vibrant middle class in Canada.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 09, 2019, 08:52:31 am
1. I did not say that the middle class in the US is diminishing because of welfare spending. That would be quite funny considering the "welfare" America has

2. (for CC): I am saying that extensive redistribution (which inevitably means high taxes and large bueraucracy) can hinder the development and growth of the middle class. I am not saying this is guaranteed to happen in every country where there is a welfare system.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Razgovory on January 09, 2019, 09:02:21 am
Wealth disparity is probably one of the reasons that Populists like Trump are coming to power.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on January 09, 2019, 09:18:22 am
Wealth disparity is probably one of the reasons that Populists like Trump are coming to power.

Yes but redistributing by handouts via a committee is probably not the right answer to that. I am of course aware that nobody is talking of doing that.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 09, 2019, 09:27:43 am
Much like free speech, social democracy is not for ultra virtuous ascetic people, and to be denied based on merit. It’s for mitigating the shittiy decisions that disadvantaged people can take, and for which the repercussions will be much more severe than they could be for rich people, or genius people, or people who happen to have great skills that are in demand right now.

That's the moral hazard.  Anything that mitigates shitty decisions also incentivizes shitty decisions.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 09, 2019, 09:31:45 am
The mere fact an option carries with it risks of moral hazard is not in itself reason to avoid the option.  Moral hazard is a factor but not necessarily a determinative one. Deposit insurance is a classic example of a public policy that promotes moral hazard but no one serious advocates abandoning all deposit insurance, because the moral hazard of having it < actual hazard of not having it.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 09, 2019, 09:41:11 am
The mere fact an option carries with it risks of moral hazard is not in itself reason to avoid the option.  Moral hazard is a factor but not necessarily a determinative one. Deposit insurance is a classic example of a public policy that promotes moral hazard but no one serious advocates abandoning all deposit insurance, because the moral hazard of having it < actual hazard of not having it.

Deposit insurance is a poor rebuttal example because its counterpart is regulation of lending risk.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 09, 2019, 10:52:46 am
We generally do not behave in life the way we behave in an insurance contract. Or in a lab situation. Or in high-flying investment schemes in a world that is set up to put any moral consideration at arm's length. 

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 09, 2019, 10:57:41 am
I'm guessing that's addressed to me, but I don't know what your point is.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 09, 2019, 11:12:33 am
We generally do not behave in life the way we behave in an insurance contract. Or in a lab situation. Or in high-flying investment schemes in a world that is set up to put any moral consideration at arm's length.

I really don't understand the point you are trying to make here.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 09, 2019, 11:59:59 am
Why are you concerned that a poor person pay a price but not so concerned that a rich person does not pay a price which is equally devastating to them?
I do not recall saying anything like that.

A rich person is usually rich because:
a) said person is smarter (can get above others, can do more compex things)
b) said person is healthier (never stops running, can work longer hours)
c) said person had father & grandfather who were smarter and healthier than the average population and got richer.

Education gives you a good chance of attaining the top echelons of society, but you could become very rich too with limited education.  But if you have poor health, physical or mental, your only chance to be at the top is your ancestry.  Billionaire mom or dad will help.

That may be truer in countries with limited social nets like HK and USA, but it is also true for Canada and Europe.  If you're dumb and healthy, you go nowhere but shitty jobs. Or jail.  If you're smart and unhealthy, you get into middle management-type positions, private or public, but limited in your carreer options.  Forget about becoming a director of anything, becoming a partner in a law firm or anything like that.  A depressive person will not get the tougher assignments.  A construction worker with a broken back will not work many hours a week and be of limited use to its employers.  No promotions, only regular pay increase.

Quote
If you want to be the supreme disciplinarian then have a progressive tax rate that makes shitty decisions equally painful.
The mistake Oex is making is in basing his decisions on what whill hurt the rich.  What would make a billionnaire's daughter fall from grace when she makes a shitty decision, what would make her slide down the serpent so she gets to the same point that a poor person who made the same shitty decisions?

Let's say we tax everyting above 10M$ at 90%.  And let's say, for example, I am that very rich person, earning 10M$ a year.  I have two kids. One is depressive, the other is a junkie that constantly gets in and out of rehab.  I make 10M$ a year.  I'm offered a promotion/other job that gives me 2 more million.  I take it.  That nets me 600k$ per year more than last year.

In this situation, do you think I let my kids sit on a waiting list for a psychiatrist?  For a rehab therapy?  In Quebec, a depresive person in need of psychological assistance can wait for about 2 years to see a specialist.  Even suicidal person can be sent back home after a 24hrs watch because there aren't enough resources available.  Even if parents tell the doctors/hospital their son is depressive and constantly talks about suicide.

So, with my 10M$ a year (minus taxes) and my 600k$ raise, do I let my kids wait?  My depressive kid who uses marijuana because it helps him relax?  My junkie in&out of rehab?
No, I pay for a private therapy to help them.  I hire bodyguards to protect them if they're in trouble with someone.  I pay their drug debts.  I still got enough money for lots of things...

It's a stupid reasoning.  Even if you were to cap all revenue at 200k$, tax everything above at 100%, seize any house worth more than 100k$, do you really think you are hurting the very rich to the point they will be back to were the person with basically no revenue is after he/she fucks up?

The answer is no.  Smarter&healthier people will get to the top, one way or another.  Tax them too much, they end up living elsewhere or evade tax by any means possible.  Don't mistake me: tax evasion will always be there, the moment you tax someone at a slightly higher level than somewhere else where the costs of setting up an account is offset by the gains, there will be tax fraud.  But you can limit it.

US is very different than Canada, and I do think they do not tax the rich enough.  I don't think it's hurtful to the economy if the top 1% pay a little more taxes while they are living, if, above a certain property value, they have a supplemental tax rate.

I do think the main problem in Quebec and Canada is that we're taxed too much for the revenues we have.  At the Federal level, you reach the maximum echelon at around 205k$. Quebec is 105k$.

105k$ to get the max tax rate.  It seems really, really, rich when you're working at minimum wage, but if you think about, 100k$, is about what a bachelor degree nurse will make in a hospital with just a little overtime.  A carpenter will make roughly 85k$ a year, taxed a few percent lower at 24% instead of 25.75%.

That really discourage lots of workers to work longer hours, to do some overtime when needed.  And with the changes made to EI by Trudeau, our workers don't even want to work in winter anymore.  Why freeze my butt outside when I make just as much with EI and only have to wait 1 week with no penalty for recuring demands?


So, like I said, dumb reasoning from the left, again.

This isn't a game of serpent and ladder. We don't all start equal with the same chances, unfortunately.  I have a distant friend in a wheelchair.  Stuck there since birth.  Extremely smart guy.  But could never really work, except for himself, advertising his conditions, expressing himself on social media and asking for charity to pay for his care, outside of the hospice.  Had he been born healthy, we would talk of him as a successful entrepreneur.  Now, he's just the funny guy in a wheelchair.

Compare this guy with a Peladeau.  Or Bronfman.  Or Moslon.  Or Thomson.
What is the tax rate your need to put a Bronfman in as bad a position as my friend if both fucks up things really bad?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 09, 2019, 02:47:55 pm
I'm guessing that's addressed to me, but I don't know what your point is.

I don't have much time, but in a nutshell:

One of the problems of "moral hazard" is that it is located on that ever-so-fuzzy border in economics between what is prescriptive, what is descriptive, and what is normative. You can certainly use moral hazard in an ultra-technical, morally neutral sense, in which case it's about risk, and risky behavior, which can always be circumscribed into specific situations, like insurance. The question then becomes the classic problem: whether you want to describe what actually happens, or what you want to prevent happening. And so, on that matter, how many studies do we have of moral hazard - that is, people actively choosing risky behavior because they were protected? You have to do that in a lab, with artificial situations, or through modelization. In most cases, you have to posit a clear link between a measurable result, and a policy. Which may explain why most of the cases I am aware of, are cases that happen in fields which are highly economically formalized - that is, they happen not among poor people making shitty decisions, they happen among people who have been rigorously trained to think about maximizing their advantages, and know they have access to resources that enable them to get out of shitty situations. As economists regularly lament, people make all sorts of decisions without calculating precisely the risk/reward in order to maximize their benefit. How many people suddenly embark on a unhealthy lifestyle because they know they have universal health coverage? And how many people actually chose a healthy lifestyle because they know they do not have one? This is not to say that fraud doesn't happen, nor that complex welfare or bureaucratic systems do not multiply possibilities for fraud - but it's not the existence of coverage that suddenly makes people criminal, or fraudsters.

But the main issue with moral hazard is that it's a slippery concept. It's super easy to go from circumscribed concerns about "risk", into "shitty behavior", as you did - and, as an aside, as many who studied moral hazard also do. What is "risky behavior" when choosing which program to attend at university? What is the moral standpoint we want to take? Is it risky for the society, or the individual? What "lack of concern", or "lack of care" is embodied by studying philosophy? What I have seen of the moral hazard literature exported outside of insurance is amazingly stupid about cultural specificity, conflict resolution, cycles of vengeance, etc - yet, it's clearly used with strong prescriptive overtones that the "moral" label carries.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 09, 2019, 04:01:16 pm
Your laboratory criticism seems more directed at stylized sociology experiments in which student volunteers eat jelly donuts than it does at economics, which relies for the most part on real world data.  Underclass women having babies out of wedlock in the absence of presence of AFDIC, for example, is not a laboratory experiment.

As to the part about normative/prescriptive/descriptive, again I'm not sure what your point is.  My hunch is that you are trying to say that the agenda of the person making the claim of moral hazard is relevant.  If that is so, I ask why does it matter?  The data on correlation and the theory about causation are either robust and replicable, or they're not.  Either there is an omitted variable bias or there isn't.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on January 09, 2019, 04:13:21 pm
I would say that insurance concept is very relevant, and not only because to me it’s always relevant, but because welfare state is really social insurance.  It’s insurance against unlucky shit happening to you, and it’s insurance against being born stupid and talentless.

Because it is insurance, insurance concepts are helpful to discuss.  There are actually two different hazards, moral hazard and morale hazard.  Moral hazard is gaming the insurance company, and morale hazard is changing risk control due to knowing you’re protected by insurance. 

These two hazards, plus the fact that I need to be paid, make insurance a losing proposition to people on average.  However, people still get insurance.  Why?  Because utility lost from losing money is greater than utility gained from gaining money.  That’s also why welfare state is a good deal, up to a reasonable point.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 09, 2019, 04:35:32 pm
I would say that insurance concept is very relevant, and not only because to me it’s always relevant, but because welfare state is really social insurance.

I didn't say it was irrelevant. I said it was slippery, and not least because terms like "talentless" and "stupid" clearly convey  moral judgment, making it easy to move between moral hazard, morale hazard, evil tendencies, and things to proscribe. Things may be moral, and risky, immoral, and safe. One can game the insurance, and find it good economic behavior, and one can game the insurance, and find it abhorrent.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 09, 2019, 04:53:31 pm
The mere fact an option carries with it risks of moral hazard is not in itself reason to avoid the option.  Moral hazard is a factor but not necessarily a determinative one. Deposit insurance is a classic example of a public policy that promotes moral hazard but no one serious advocates abandoning all deposit insurance, because the moral hazard of having it < actual hazard of not having it.

Deposit insurance is a poor rebuttal example because its counterpart is regulation of lending risk.

We have no shortage of mechanisms for regulating individual behavior.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 09, 2019, 05:10:09 pm
We have no shortage of mechanisms for regulating individual behavior.

Forced sterilization has gone out of favor.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Oexmelin on January 09, 2019, 05:50:26 pm
That's your solution to everything.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 10, 2019, 10:07:45 am
Surely there is some middle ground between nihilist anarchism and forced sterilization?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Valmy on January 10, 2019, 10:08:14 am
Surely there is some middle ground between nihilist anarchism and forced sterilization?

This is the great question of our generation.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 10, 2019, 10:16:35 am
Surely there is some middle ground between nihilist anarchism and forced sterilization?

In the abstract, definitely.  In the real world, there is fierce resistance to the idea of attaching conditions to welfare.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on January 10, 2019, 10:43:38 am
In the abstract, definitely.  In the real world, there is fierce resistance to the idea of attaching conditions to welfare.

Not *that* much resistance.  Bill Clinton managed to pull it off.  Compared to say gun control, or lowering farm subsidies, or getting rid of favorable tax treatement of carried interest, it's positively easy peasy.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on January 10, 2019, 11:00:36 am
Not *that* much resistance.  Bill Clinton managed to pull it off.  Compared to say gun control, or lowering farm subsidies, or getting rid of favorable tax treatement of carried interest, it's positively easy peasy.

That was not a case of attaching conditionality but rather of drastically reducing scale and duration.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 10, 2019, 01:38:07 pm
But the main issue with moral hazard is that it's a slippery concept. It's super easy to go from circumscribed concerns about "risk", into "shitty behavior", as you did - and, as an aside, as many who studied moral hazard also do. What is "risky behavior" when choosing which program to attend at university? What is the moral standpoint we want to take? Is it risky for the society, or the individual? What "lack of concern", or "lack of care" is embodied by studying philosophy? What I have seen of the moral hazard literature exported outside of insurance is amazingly stupid about cultural specificity, conflict resolution, cycles of vengeance, etc - yet, it's clearly used with strong prescriptive overtones that the "moral" label carries.
You willingly pick a field of study with 70%+ unemployment rate.  Then you complain how unfair your life is.

You willingly pick a field of study or a university where there is barely no failures, nearly everyone who attends class get a pass.  You suffer from rejection by employers.  Then you complain how unfaire your life is.

You willingly pick a university known for not teaching math.  Then you complain your new university asks you to take math & preparatory classes for one semester because your undergrda diploma ain't worth much when you wish to pursue higher studies.

In all these cases, it is a burden for society.  And for the subject.  But should the state double the burden by also making sure these people are as employable as those who worked harder?

You willingly pick a part time job so you can have time for leisure&family.  But you want the same earnings as someone working 60hrs a week.  Why should society compensate your individual choice?

There is a moral hazard in everything you do.  Do you think clearly about it before acting?  Do you rationally decide to drive drunk?  Probably not.  Should you be exempt from penalty because you didn't reflect on the consequences of your shitty decision since it was impossible at the time to make a clear, rational decision?

Society can treat your addiction.  But it shouldn't be burdened by your choices.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 10, 2019, 01:48:04 pm
Surely there is some middle ground between nihilist anarchism and forced sterilization?

In the abstract, definitely.  In the real world, there is fierce resistance to the idea of attaching conditions to welfare.
true.  But resistance can be overcome.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on January 29, 2019, 06:09:01 pm
Krugman's opinion piece in the Times today

Quote
America invented progressive taxation. And there was a time when leading American politicians were proud to proclaim their willingness to tax the wealthy, not just to raise revenue, but to limit excessive concentration of economic power.

“It is important,” said Theodore Roosevelt in 1906, “to grapple with the problems connected with the amassing of enormous fortunes” — some of them, he declared, “swollen beyond all healthy limits.”

Today we are once again living in an era of extraordinary wealth concentrated in the hands of a few people, with the net worth of the wealthiest 0.1 percent of Americans almost equal to that of the bottom 90 percent combined. And this concentration of wealth is growing; as Thomas Piketty famously argued in his book “Capital in the 21st Century,” we seem to be heading toward a society dominated by vast, often inherited fortunes.

So can today’s politicians rise to the challenge? Well, Elizabeth Warren has released an impressive proposal for taxing extreme wealth. And whether or not she herself becomes the Democratic nominee for president, it says good things about her party that something this smart and daring is even part of the discussion.

The Warren proposal would impose a 2 percent annual tax on an individual household’s net worth in excess of $50 million, and an additional 1 percent on wealth in excess of $1 billion. The proposal was released along with an analysis by Emmanuel Saez and Gabriel Zucman of Berkeley, two of the world’s leading experts on inequality.

Saez and Zucman found that this tax would affect only a small number of very wealthy people — around 75,000 households. But because these households are so wealthy, it would raise a lot of revenue, around $2.75 trillion over the next decade.

Make no mistake: This is a pretty radical plan.

I asked Saez how much it would raise the share of income (as opposed to wealth) that the economic elite pays in taxes. His estimate was that it would raise the average tax rate on the top 0.1 percent to 48 percent from 36 percent, and bring the average tax on the top 0.01 percent up to 57 percent. Those are high numbers, although they’re roughly comparable to average tax rates in the 1950s.

Would such a plan be feasible? Wouldn’t the rich just find ways around it? Saez and Zucman argue, based on evidence from Denmark and Sweden, both of which used to have significant wealth taxes, that it wouldn’t lead to large-scale evasion if the tax applied to all assets and was adequately enforced.

Wouldn’t it hurt incentives? Probably not much. Think about it: How much would entrepreneurs be deterred by the prospect that, if their big ideas pan out, they’d have to pay additional taxes on their second $50 million?

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 30, 2019, 10:34:43 am
Imagine how many walls you could build with that money!?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Grey Fox on January 30, 2019, 11:01:53 am
Hospital walls? :)
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Barrister on January 30, 2019, 11:30:55 am
Krugman's opinion piece in the Times today

Quote
America invented progressive taxation. And there was a time when leading American politicians were proud to proclaim their willingness to tax the wealthy, not just to raise revenue, but to limit excessive concentration of economic power.

“It is important,” said Theodore Roosevelt in 1906, “to grapple with the problems connected with the amassing of enormous fortunes” — some of them, he declared, “swollen beyond all healthy limits.”

Today we are once again living in an era of extraordinary wealth concentrated in the hands of a few people, with the net worth of the wealthiest 0.1 percent of Americans almost equal to that of the bottom 90 percent combined. And this concentration of wealth is growing; as Thomas Piketty famously argued in his book “Capital in the 21st Century,” we seem to be heading toward a society dominated by vast, often inherited fortunes.

So can today’s politicians rise to the challenge? Well, Elizabeth Warren has released an impressive proposal for taxing extreme wealth. And whether or not she herself becomes the Democratic nominee for president, it says good things about her party that something this smart and daring is even part of the discussion.

The Warren proposal would impose a 2 percent annual tax on an individual household’s net worth in excess of $50 million, and an additional 1 percent on wealth in excess of $1 billion. The proposal was released along with an analysis by Emmanuel Saez and Gabriel Zucman of Berkeley, two of the world’s leading experts on inequality.

Saez and Zucman found that this tax would affect only a small number of very wealthy people — around 75,000 households. But because these households are so wealthy, it would raise a lot of revenue, around $2.75 trillion over the next decade.

Make no mistake: This is a pretty radical plan.

I asked Saez how much it would raise the share of income (as opposed to wealth) that the economic elite pays in taxes. His estimate was that it would raise the average tax rate on the top 0.1 percent to 48 percent from 36 percent, and bring the average tax on the top 0.01 percent up to 57 percent. Those are high numbers, although they’re roughly comparable to average tax rates in the 1950s.

Would such a plan be feasible? Wouldn’t the rich just find ways around it? Saez and Zucman argue, based on evidence from Denmark and Sweden, both of which used to have significant wealth taxes, that it wouldn’t lead to large-scale evasion if the tax applied to all assets and was adequately enforced.

Wouldn’t it hurt incentives? Probably not much. Think about it: How much would entrepreneurs be deterred by the prospect that, if their big ideas pan out, they’d have to pay additional taxes on their second $50 million?

I'm curious then why Sweden and Denmark got rid of their wealth taxes.  Is it possible that they did in fact experience large-scale evasion?

I just see lots of unintended consequences with a wealth tax.  For starters the 2% (or 3%) comes off every single year.  You'd have to try and grow your assets by at least that amount each and every year.  That may lead to more short-term thinking by the wealthy, which is not generally seen as a good idea.  Or what about those main asset is stock in a company they control.  You're forcing them to sell stock and dilute control each and every year.  And does this apply to charitable foundations?  I can't see that being very popular.  But if it doesn't, I see every wealthy person setting up charitable foundations, controlled by themselves.

And that's without considering how easy it might be to evade such wealth taxes.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 30, 2019, 11:32:23 am
Hospital walls? :)
border walls, carrier walls, destroyer walls, aircraft walls, space station walls, limitless walls!!
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on January 30, 2019, 11:33:22 am
I see every wealthy person setting up charitable foundations, controlled by themselves.
aren't they already doing it?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Threviel on January 30, 2019, 11:48:57 am
It was seen as an an inefficient tax in Sweden, it was thought to lead to dilution of capital that would otherwise be invested. The gift and inheritance tax was removed at the same time by an new conservative-liberal government. It was in effect 1910-2007, so it can't have been seen as a major problem.

There was some evasion, but I don't remember it as a great problem. Lots of fortunes in Sweden are in foundations like IKEA and the Wallenberg family fortune for example.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on January 31, 2019, 08:12:05 pm
I'm curious then why Sweden and Denmark got rid of their wealth taxes.  Is it possible that they did in fact experience large-scale evasion?

My guess is it was because more right wing governments were elected at that time.  Is there any evidence there was large scale evasion, or was it for some other reason?

Quote
I just see lots of unintended consequences with a wealth tax.  For starters the 2% (or 3%) comes off every single year.  You'd have to try and grow your assets by at least that amount each and every year.  That may lead to more short-term thinking by the wealthy, which is not generally seen as a good idea.  Or what about those main asset is stock in a company they control.  You're forcing them to sell stock and dilute control each and every year.  And does this apply to charitable foundations?  I can't see that being very popular.  But if it doesn't, I see every wealthy person setting up charitable foundations, controlled by themselves.

The fact that massive wealth accumulation would be diminished is not an "unintended consequence" of a wealth tax.  One of the express reasons for such a tax is to avoid concentration of wealth.  Further, the argument that someone with Billions of dollars would "have to try to grow their assets by at least that amount" doesn't seem very persuasive.   They are not exactly trying to save for their retirement. 

As far as "forcing them to sell stock" if it is a public company why is dilution of control an issue in any event?  If it is a privately held company, their wealth is not based on the value of the stock but on the revenue the company generates which they take out through dividends and other means.

And as GF already pointed out, what person this tax would apply to does not already have their own charitable foundations controlled by themselves? 


Quote
And that's without considering how easy it might be to evade such wealth taxes.

Why would it be easy?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Monoriu on February 01, 2019, 01:56:58 am
First it probably won't be too easy to implement.  Valuation of assets will be an issue, as much of the wealth of the super wealthy will be in assets that aren't too liquid.  Next there will be unintended consequences like capital flight.  Then there will be the whole issue of taxing the rich for the sake of taxing the rich.  This kind of tax is not a good revenue source, because the tax base is too narrow.  A good source should be reliable and stable throughout the years.  But because the number of people paying this tax is so low, it is bound to fluctuate a lot from year to year.  Meanwhile, government expenditure tends to be constant. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on February 01, 2019, 10:52:43 am
As far as "forcing them to sell stock" if it is a public company why is dilution of control an issue in any event?  If it is a privately held company, their wealth is not based on the value of the stock but on the revenue the company generates which they take out through dividends and other means.
Dividends is revenue*.  Stock value is wealth.

* I simplified, I know.

Quote
Quote
And that's without considering how easy it might be to evade such wealth taxes.

Why would it be easy?

I'm generally in favour of taxing luxury property to higher levels.
However, a general wealth tax would be hard to implement, imho.

First off, any foreign property would not be taxed by this.  See the Bronfman case, the good deal they got from the previous Liberal govt.  They moved their money to the US without paying a cent of taxes.  Your NYC condo would not be taxed, and being filthy rich, you could easily broker a deal for a long term stay in a canadian hotel for extended visits.

Now, wealth.  Here is the trick: we have general estimates of how rich one person is.  We don't know precisely, because there's already a lot of tax evasion.  Sure, some families living in Canada, in gigantic estates, owing their fortunes to Pierre-Elliot Trudeau and the following Liberal govt would be taxed.  But I'm not really concerned about the 5-8 billionaires of Canada, more for all the millionaires under.  With assets in Hong-Kong, Dubai, Bahamas, Virgin Islands, it's going to be pretty hard to tax that.

We're really left with the same problem we have now: fiscal paradises.  They are not transparant, they do not comply with our fiscal requests (unlike the US, you can't easily send a tax auditor to check their books).  Plus we need to substract from their wealth anything that is not in Canada but not hidden either.  For the millionaires and billionaires, that's a lot.  Lots of people have houses/condos/appartments in Southern US States, Mexico (well, technically, it's hard to do, but still manageable), other Latin American/Carribean countries.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Berkut on February 01, 2019, 12:02:39 pm
The answer to the question is obviously - "Whatever right strikes the optimal balance between revenue generation, incenting production, and managing the need for social services".


Duh.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zoupa on February 01, 2019, 12:52:22 pm
The answer to the question is obviously - "Whatever right strikes the optimal balance between revenue generation, incenting production, and managing the need for social services".


Duh.

Which is?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Berkut on February 01, 2019, 01:10:10 pm
The answer to the question is obviously - "Whatever right strikes the optimal balance between revenue generation, incenting production, and managing the need for social services".


Duh.

Which is?

...very important to ascertain.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Zoupa on February 01, 2019, 06:47:07 pm
Duh.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on February 01, 2019, 06:57:52 pm
It's a purely political choice.  Some people will be happy foregoing a billion dollars of lost GDP to make one person a dollar happier, others won't be willing to give up any.  And everything in between.

One thing i do see missing from that list of parameters is any consideration for a person's right to enjoy the fruits of their own labors.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 01, 2019, 07:31:08 pm
It's a purely political choice.  Some people will be happy foregoing a billion dollars of lost GDP to make one person a dollar happier...


 :huh:  That is almost as ridiculous as BB's taxes are evil mantra.

Dividends is revenue*.  Stock value is wealth.

* I simplified, I know.
 

I think we are saying the same thing.  BB was concerned that those poor Billionaires would have to sell stock to pay the wealth tax.  That makes no sense in the context of a private corporation where the money is being taken out by way of dividends and other tax friendly devices.  The stocks themselves are not sold to generate money - unless the corporation goes public and then as I stated in my earlier response - why would we care if some shares had to be sold.  Actually, even in a publicly held company it would be very unlikely the poor Billionaire would have to sell the shares since they would also likely receive dividends in that context as well.

Quote
However, a general wealth tax would be hard to implement, imho.

First off, any foreign property would not be taxed by this.  See the Bronfman case, the good deal they got from the previous Liberal govt.  They moved their money to the US without paying a cent of taxes.  Your NYC condo would not be taxed, and being filthy rich, you could easily broker a deal for a long term stay in a canadian hotel for extended visits.

The Bronfman is a bad example for your argument because the government actively cooperated to allow the necessary transactions to occur.  But I take your point that generally there could be difficulty recovering all of the tax that should be payable.  But that is the case will all taxation systems.

Quote
Now, wealth.  Here is the trick: we have general estimates of how rich one person is.  We don't know precisely, because there's already a lot of tax evasion.  Sure, some families living in Canada, in gigantic estates, owing their fortunes to Pierre-Elliot Trudeau and the following Liberal govt would be taxed.  But I'm not really concerned about the 5-8 billionaires of Canada, more for all the millionaires under.  With assets in Hong-Kong, Dubai, Bahamas, Virgin Islands, it's going to be pretty hard to tax that.

Yeah, in the Canadian context, I think that is a good argument for why the Warren version of the tax may not work here.  But in the US?

Quote
We're really left with the same problem we have now: fiscal paradises.  They are not transparant, they do not comply with our fiscal requests (unlike the US, you can't easily send a tax auditor to check their books).  Plus we need to substract from their wealth anything that is not in Canada but not hidden either.  For the millionaires and billionaires, that's a lot.  Lots of people have houses/condos/appartments in Southern US States, Mexico (well, technically, it's hard to do, but still manageable), other Latin American/Carribean countries.

Agreed, in Canada it may not be as workable but I think it is viable in the US.  And if other jurisdictions implement it, and especially the US, then it becomes much more viable in Canada.





Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Berkut on February 02, 2019, 10:12:32 am
One thing i do see missing from that list of parameters is any consideration for a person's right to enjoy the fruits of their own labors.

I think this is a incredibly shallow position. You see it commonly when people bleat about "Taxation is theft!".

I am fine with every person have total right to enjoy the fruits of their labors. The fruits of THEIR labors that they, based on their inherent capabilities, produce on their own.

I figure the most capable person in the world can reasonably claim maybe 0.01% of their productive output as being completely their own, and not in any way dependent on their inclusion in a social human society. Everything else is a question of societal agreements on how to reasonably distribute the productive output of a cooperative effort.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Solmyr on February 02, 2019, 12:10:21 pm
Indeed, I suspect only a minuscule, if any, part of the wealth of the obscenely rich is fruit of their own labour. Not to mention a lot of the wealth in the modern world is inherited.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Brain on February 02, 2019, 12:31:39 pm
One thing i do see missing from that list of parameters is any consideration for a person's right to enjoy the fruits of their own labors.

I think this is a incredibly shallow position. You see it commonly when people bleat about "Taxation is theft!".

I am fine with every person have total right to enjoy the fruits of their labors. The fruits of THEIR labors that they, based on their inherent capabilities, produce on their own.

I figure the most capable person in the world can reasonably claim maybe 0.01% of their productive output as being completely their own, and not in any way dependent on their inclusion in a social human society. Everything else is a question of societal agreements on how to reasonably distribute the productive output of a cooperative effort.

lolwut
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tyr on February 02, 2019, 12:41:19 pm


lolwut


It doesn't matter if you're the best engineer in the world. Your work relies on loads of manufacturers, construction workers, farmers, a functioning police force and fire brigade, ambulance service, education system, etc...
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Brain on February 02, 2019, 12:43:54 pm


lolwut


It doesn't matter if you're the best engineer in the world. Your work relies on loads of manufacturers, construction workers, farmers, a functioning police force and fire brigade, ambulance service, education system, etc...

In Sweden those people have their own pay checks.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tyr on February 02, 2019, 12:48:16 pm


lolwut


It doesn't matter if you're the best engineer in the world. Your work relies on loads of manufacturers, construction workers, farmers, a functioning police force and fire brigade, ambulance service, education system, etc...

In Sweden those people have their own pay checks.

And who pays for the government ran ones?
Are farmers really getting by without any subsidies?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Brain on February 02, 2019, 12:52:32 pm


lolwut


It doesn't matter if you're the best engineer in the world. Your work relies on loads of manufacturers, construction workers, farmers, a functioning police force and fire brigade, ambulance service, education system, etc...

In Sweden those people have their own pay checks.

And who pays for the government ran ones?
Are farmers really getting by without any subsidies?

Even Sweden is nowhere near a 99.99% tax rate.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tyr on February 02, 2019, 12:57:46 pm
 

Even Sweden is nowhere near a 99.99% tax rate.

I may have overlooked something in the thread but I'm pretty sure nobody here wants that.
Even in the world at large you're into screwball territory there.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Brain on February 02, 2019, 12:59:05 pm

Even Sweden is nowhere near a 99.99% tax rate.

I may have overlooked something in the thread

That's possible.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Berkut on February 02, 2019, 07:57:38 pm

Even Sweden is nowhere near a 99.99% tax rate.

I may have overlooked something in the thread

That's possible.

Stop be intentionally obtuse.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Grey Fox on February 04, 2019, 11:27:11 am
One thing i do see missing from that list of parameters is any consideration for a person's right to enjoy the fruits of their own labors.

That is not how a person earns 10 million + $. It's perceived worth & negotiation tactics. No CEO is worth even 10% of their salary.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on February 04, 2019, 11:53:48 am
CEOs and the like get so much money because basically they are the ones who decide their own salaries. At least, it's the same group of people.

In my previous work, which was at a massive site of global corpo, the department managers were running the show on the site so they gave themselves all the perks. e.g. they were the only ones with company cars. They had zero reason to have them, as they were not required by their work to be outside the office, and they got the highest paychecks.

But in reality almost all of them were totally replacable. The different high level IT engineers, now they were irreplacable and they carried way more weight when it came to actual influence on how things are run. The dept. managers just took their orders from abroad on what the objectives are and hoped their people deliver them. But if you were ignorant of the finer workings and just walked in you'd had thought they were fucking masters of the universe. Because their little group decided on what the group receives.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tamas on February 04, 2019, 11:54:30 am
Besides executive pay is IMHO smoke and mirrors. It's a convenient thing to throw in front of the masses, so they can hate and frown and nothing needs to change.

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Valmy on February 04, 2019, 11:59:45 am
CEOs and the like get so much money because basically they are the ones who decide their own salaries.

Do they? Pretty sure if they were wasting money on extravagant executive salaries unnecessarily the Board would eat them alive. Investors are not investing their cash to not get a return on it.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: alfred russel on February 04, 2019, 12:11:02 pm
How much should the CEO of a major corporation get? Lets take one that has annual revenue of say $50 billion and annual net income of $5 billion.

$25 million a year is clearly not significant for such a corporation (I know some get more, this is an example). The cases for paying that much:
-The company will be disrupted by a change in management, and avoiding a disruption is worth that amount,
-The money is generally paid largely in stock based compensation, which provides an incentive to act in the interest of shareholders (for example, what CEO wants to go to work in an office where he is laying people off? Or live in a community where his corporation is dumping chemicals in the local water supply? He needs to be incentivized to do these things.)
-It avoids compressing salaries throughout the organization while still providing big salary step ups for key roles.
-A lot of senior people in consulting, investment banking, and accounting that work with CEOs are making 7 figure salaries. These are much less high profile than a CEO of a public company--and thus in many ways more attractive jobs. There needs to be compensation to prevent people from going into those roles.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 12:31:48 pm
CEOs and the like get so much money because basically they are the ones who decide their own salaries.

Do they? Pretty sure if they were wasting money on extravagant executive salaries unnecessarily the Board would eat them alive. Investors are not investing their cash to not get a return on it.

Your certainty is misplaced.  While in theory the board of directors is there to provide oversight on behalf of the shareholders (who elect the board) in practice the board is comprised of people who also benefit from overgenerous compensation because they come from the executive class.  There is no chance they are going to make the argument that emperor has no clothes.  As a result the comp committees are stacked with insiders who benefit from the over payment of senior executives.

There are some rare occurrences where shareholder rights activists will try to influence the election of a board but the entrenched interests are often too strong. It's really all a mug's game from the perspective of the shareholder that increases the income disparity in society.


On the topic of what the marginal tax rate ought to be - here is a piece in the NY Times explaining that the radicals are ones who keep decreasing the taxes on the rich.

https://www.nytimes.com/2019/02/03/opinion/democrats-wealth-tax.html?action=click&module=Opinion&pgtype=Homepage
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on February 04, 2019, 12:47:55 pm
To me it’s not obvious why CEOs shouldn’t be paid a lot.  There are a lot of stories about either a skilled CEO adding tens of billions of dollars to the company, or sinking a company for no good reason.  When the stakes are that high, and even a minute difference in skill can be worth billions, not paying for it seems suboptimal. 

I’m sure there is plenty of corruption in the boardroom, but at the same time I find the populist arguments against high compensation of executives to be thoroughly unconvincing.  Some people are just lucky enough to be in a time and place where they can be astronomical force multipliers.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on February 04, 2019, 01:07:59 pm
To me it’s not obvious why CEOs shouldn’t be paid a lot.  There are a lot of stories about either a skilled CEO adding tens of billions of dollars to the company, or sinking a company for no good reason.  When the stakes are that high, and even a minute difference in skill can be worth billions, not paying for it seems suboptimal. 

I’m sure there is plenty of corruption in the boardroom, but at the same time I find the populist arguments against high compensation of executives to be thoroughly unconvincing.  Some people are just lucky enough to be in a time and place where they can be astronomical force multipliers.
I think there was a study, before 2008, showing invert correlation with a company's stock value vs CEO's compensation.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Tonitrus on February 04, 2019, 01:28:51 pm
Next, let’s talk major US university football coaches, and how their salary compares to players (let alone professors).  :P
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 01:30:23 pm
I find arguments that boards always protect the interests of shareholders in regard to executive compensation wishful thinking at best.  More like a fantasy.  Here is an article from way back in 2001 which was prophetic about the excesses we now see and the reasons for it.  I have deleted parts of it for brevity.  But it is still a long read and well worth it if you really think the system of executive compensation is just fine.

https://money.cnn.com/magazines/fortune/fortune_archive/2001/06/25/305435/index.htm



Quote
But you think Alfred Kinsey had trouble getting answers in his studies of sexuality? Try getting directors--especially members of compensation committees--to go on the record about executive pay, and you really hit a wall. That's particularly true if someone has the least bit of bad stuff to say: There is still a code of silence among directors that usually makes them unwilling to publicly criticize their peers.

So we came up with an alternative approach: In exchange for candor, we promised anonymity. Seven directors, all with board experience at major companies, spoke to us on that basis. They told war stories; delivered opinions about compensation consultants; and spoke about where executive pay goes from here.

The surprise in what many of these directors say--and they are all smart, strong-minded people--is how helpless they sometimes feel in the grip of a system that inexorably sweeps executive pay toward ever higher levels. Said one director defeatedly: "You sort of get rolled over by the system even if you try to do well."

The speaker, who has served on several bigtime boards, is the well-paid CEO of a FORTUNE 500 company.

Compensation committee members are not malevolent. I've seen situations that are f---d up, and yet the directors think they're doing a hell of a job. They delude themselves. They think things are being done right and fairly--they don't think they're being had--when actually the excesses they're approving are just mind-boggling.

On my own board we have very sophisticated people, and we expose the full board to what's going on about compensation. Even so, since I know more than they do about this subject, I can have them. So in a different kind of situation, where the board doesn't know much and doesn't care, it's like shooting fish in a barrel.

It's really "amateurs vs. pros." I'm classing the directors, in most cases, as amateurs, and management, together with the compensation consultants they hire, as pros. You can have a very sophisticated board--and it'll still be amateurs vs. pros.

You say you know instances where tough, rigorous people haven't survived on boards and compensation committees. I don't think that's the normal case. I think that the day of packing the board with patsies is over, if for no other reason than appearances. In any case, the odds are so stacked in favor of management that you don't need patsies.

Yes, a board needs the help of compensation consultants. They are a source of data about what comparable companies are paying, and they provide the board with reassurance. The data is often flawed, but it's better than doing back-of-the-envelope calculations.

I would say that it is unusual to find a consultant who does not end up, at the least, being a prostitute. The consultants are hired by management. They're going to be rehired by management. There's some thought given by conscientious compensation committees to hiring their own consultants. But the consultants don't want to be hired that way, because then they cut themselves off from management.

The government got in all this, of course, by passing what's called "162 (m)," which says that any cash paid an executive over $1 million is nondeductible unless the excess is related to performance. This made everybody change their compensation systems to get around the $1 million ceiling, and in the process they built in new kinds of excess.

They now use performance formulas--based, say, on return on equity--that determine the size of the bonus pool. Most of the formulas are b.s. When you've got a formula, you've got to have goals--and it's the people who are the recipients of the money who are setting these. It's in their interests to keep the goals low so that they will succeed in meeting them. You've got the fox in the chicken coop.

One of the main ways that enormous amounts of money have been made is with up-front options. An executive is issued a huge number of options today, and as the stock goes up, he gets the benefit. It will say in the proxy that this is a "multi-year" option, supposedly taking care of the executive for a while. But the proxies seldom state how many years are covered. And then maybe you'll get two years down the road, and the deal will be renegotiated. So anytime there are up-front options, the shareholders should want it to be very explicitly stated that the grant covers a certain number of years. That doesn't prohibit the board from changing the deal, because the board can always do what it wants. But at least an investigative person like a reporter can go back and find out what was said originally.

What's going to happen in the next ten years? What's happening immediately is that the vehicle of stock options, given the slowdown in the stock market, may not be so lucrative. Still, everybody's appetite has been whetted, and today there's a sense of entitlement. People say, "We're worth it, goddamn it." So if options don't do the job, some other mechanisms will be used instead. And if today's formulas don't produce big enough pots, they will disappear and be replaced by something else. Anyone who is greedy, anyone who is on the make, anyone who is aggressive about what they're being paid will get rid of formulas they don't like.

Government isn't going to change anything. We're not going to turn into Cuba. When you've got some smart lawyer like Marty Lipton working against two members of Congress from Illinois, it's no contest.

I think there's been some progress. There's much more punishment for bad performance than there used to be. I think the fact that they're knocking executives out at a greater rate is good.

But some of what you see is so over the top. There's something intrinsically wrong with some of these amounts of money. I don't know that anything will stop that except self-control. But to ask for self-restraint flies in the face of human nature.

The speaker is a corporate executive who has had wide experience on boards.

When it comes to relating pay to performance, compensation committees are really in the pockets of CEOs. There are all kinds of cozy relationships involved. And when a CEO wants the rules changed as to how people are paid, the rules simply get changed. I think that one of the problems in the whole compensation system is that you pay for performance--and you pay well--but you also pay for subpar performance.

A few years ago I was on the comp committee of a company that had lots of problems. We were having a committee meeting, and the head of human resources said that the CEO doesn't have any equity in his stock options. And I said, "Well, he shouldn't have any equity, because the stockholders have lost a lot of money in this company, and there should be some kind of relationship between what the executives are accumulating and what's happening to the shareholders." Well, the HR director listened, but I think what I said just didn't register with him.

Then there was a case at another company about five years ago in which I took a strong stand regarding a guy who ran a major division. He was the architect of some terrible deals for the company. On top of that he never seemed to have a handle on what was going on. All of his projections for his division were wrong. He underestimated what capital expenditures needed to be. He was way off on growth.

So the comp committee has a meeting to talk about bonuses--and if there was ever a person who didn't deserve one, it was this fellow I'm talking about. Nevertheless, the CEO came into the meeting and recommended that this guy get a pretty good-sized bonus. And I said, "How can you do this? This guy's poor decisions have cost the company billions of dollars. If you're going to pay for performance, you have to have both a carrot and a stick. Basically, this guy should be kicked out of the company. But if he's going to be around, you've got to send a message not only to him but even more importantly to the organization that if someone screws up, they don't get a bonus."

Well, I think the committee sort of agreed with me. But ultimately the others said, "We've got to let the CEO have the authority to run his organization," which I actually think is a bunch of crap. So what happened--and I think this was mainly because of my bitching and complaining--is that the CEO cut this fellow's bonus by half. That meant he ended up getting a reasonable amount for costing the shareholders billions.

I then said to the chairman of the committee, "This stuff is wrong." And he said, "I agree, but we've got to do it." Basically, what people understand they have to do is go along with management, because if they don't they won't be part of the club. You sort of get rolled over by the system even if you try to do well. What it comes down to is that directors aren't really independent. CEOs don't want independent directors.

I think of another comp committee I was on, at a company run by a friend of mine, a good guy. When he asked me to move from the audit committee to become chairman of the comp committee, I said, "We're friends, but you should know that I'll do what's right." And he said, "That's why I want you to have the job." Well, for the two years I was chairman of the comp committee, the company didn't make any money. So I zeroed the CEO out both years--yes, didn't give him a bonus. The first year we gave some bonuses to other people in senior management, but the second year we zeroed everybody out. Our friendship was greatly tested. We're still friends, but we're not close.

The speaker is the CEO of a very successful FORTUNE 500 company.

I've been on nearly 20 boards. But people know I believe strongly that exceptional compensation should be paid only when there's truly exceptional performance, and I've therefore been asked only once to be on a compensation committee. That was not one of the great periods of my life. Management came up with a compensation plan that was terrible for the shareholders. I told the other two members of the comp committee that I would vote against it. The funny thing is that they agreed with me about the awfulness of the plan. But they said that it would undermine the CEO if we voted against the plan, and besides, no matter what we voted, the full board would see that the plan was passed. So they voted to approve this thing and naturally it went through.

I've been on other boards where the CEO earned unholy amounts of money. I don't have any objection to that--in fact, I applaud it--if it's truly earned. There's one case I'm thinking of where if I'd been in charge of the compensation arrangements, which I certainly wasn't, the CEO might have earned even more money than he did--and that was already huge. But what he earned would have been strictly tied to the company's performance, and that wasn't the case with the plan he had.

The scandal of what goes on in compensation is how much is paid in the many, many instances when it isn't at all deserved. But a sub-scandal is the lack of a charge against earnings when stock options are issued. Companies go along as if these things are free, when actually they cost the shareholder enormous amounts. If you think how much more money CEOs have gotten because there isn't an earnings charge for options, it blows your mind.

CEOs will claim it's all deserved, saying, "Look at the way I made my stock go up." That's bunk in a lot of cases, egregiously so at companies that don't pay dividends. Let me refer you to a Treasury zero bond: If you buy one today and hold on for ten years, it will rise by 74%. And you won't even have had to give President Bush an option on the bond.

The test of how much you pay someone is "Do we lose him if we don't pay him this?" In Economics 101, they call this a market system. So why did Ted Turner get options at AOL Time Warner? Is he going someplace else? Or did Oracle think they'd lose Larry Ellison if they didn't give him all those options? Or was Michael Dell going to leave Dell?

A good name for every compensation consulting firm would be Ratchet Ratchet & Ratchet. Any other kind of consultant you can think of is brought in to try to cut costs. The basic goal of compensation consultants is to justify whatever it is the CEO wants to make. After all, who's going to recommend these consultants to other CEOs? Not the little old lady in Dubuque, with her 100 shares, that's for sure.

It's basically what's called a "corrupt system." A corrupt system is where non-evil people do evil things. That's the real problem. If there are corrupt people, you can do something about it. If it's a corrupt system, it's very difficult to do something about it.

I think the best chance for bringing compensation under control would be, say, a dozen really powerful institutions--organizations like Fidelity and Vanguard--stating that they're going to vote against any management that oversteps on compensation. But we haven't seen that happen, and I don't think we will.

The way I see it, the stockholders are going to continue to get screwed. Baseball players will get paid according to their batting average, entertainers will get paid according to the size of their audience, and CEOs will get paid according to a system that scorns objectivity and market forces.

And that will basically be because most directors see what they're handing out as play money. What it amounts to is that there's no one representing shareholders. It's like having labor negotiations where one side doesn't care. That would be a travesty, and this is too.

The speaker is a wealthy financier who has served on many compensation committees.

I have never asked to serve on a corporate board, never even hinted at wanting to be on one. And I have never asked to be on a compensation committee.

I suspect that the reason I've been put on so many is that word gets around that I believe in paying people very, very well. I believe in capitalism in every sense of the word. Every comp committee I'm on, we're saying, "Goddamn it, let's make it worthwhile for people to want to work here." On the other hand, I'm the first guy to get really tough--it's in my DNA--when somebody is doing a bad job. The comp committee is where it all coalesces and you say, "Job well done," or "You did a crummy job, and you're not getting paid."

The reason I believe in paying good people very, very well is that talent is scarce. I'll never understand a guy running a $50 billion business, and doing it well, and the comp committee arguing over whether they should give him an extra $200,000 a year. That's stupid. I recognize that there's got to be some balance and some order to the process. Look at a place like GE, for example. You can't have Jack Welch, even though this guy's done his job unbelievably well, making $100 million and the next guy making $86,000.

You're asking me what the limits are. If it's okay for Welch to get salary and bonus of more than $15 million, is it okay for him to get $50 million? I cannot sit and say to you what the right compensation number is. That's the judgment call, the business judgment call. That's what a board of directors does. Look, if we had a manual that told us what directors should do, we could go to Actors' Equity and hire six or eight very attractive people, take them to Brooks Brothers, buy them suits, and put them on the board.

I won't go on any board of any company unless I'm prepared to invest at least $5 million in it. I suspect that because of my net worth, the compensation numbers that I think of are different from a director who, say, has worked for a bank for 30 years and he's now retired and is making no more than $400,000 or $500,000 a year in pension. And we all walk into a comp committee meeting and I say, "Let's give that guy $10 million. He did a great job." And the other director says, "Ten million dollars? That's all the money in the world!" And I say, "No, it's not."

What are the directors at the other end of the spectrum from me arguing? They're saying, "We have to think about the public image of this thing. We have to worry about what impact this has on people down the line. And about what our customers think."

Horsefeathers! You know what our customers think? Are we selling them a great product at a competitive price, and are we willing to stand behind it? And the lowest guy in the organization? What he's thinking is, "I want that guy's job. If I do as well as that guy did, I'm going to be filthy rich."

What I know most of all is that when I see extraordinary effort and results out of a CEO, you can't pay him enough.

The speaker is a corporate executive with strong opinions about shareholder rights.

Most of the people I talk to think that CEO compensation is kind of out of control. There's the constant ratcheting that goes on. How in the world do you stop that when every self-respecting compensation committee--I just read this once again today in a proxy--says, "We want our CEO's compensation to be between the 50th and 75th percentile in our peer group." If everybody does that, it's Lake Wobegon, where every kid is above average.

Until very recently I was on the board of a company that's vaguely tech in nature, enough so that for a while the dot-coms were coming after our people. In the past we'd been relatively stingy with options. But early last year management said to the board that we should be giving away about three times as many options as we were. And I was a voice in the wilderness on this. The proposal said we'd issue options for stock that had a current market value of $750 million. And I said, "If you do the arithmetic and just say as a rule of thumb that each option has a value of one-third of the market price--I think that's a good benchmark to use--then we're jumping our compensation expense by $250 million!" And I said that wasn't fair to the stockholders.

I suggested we think about giving some amount of restricted stock instead. And two executives immediately said, "We can't do restricted stock. We'd have to run that through the income statement."

So we did the options. But then the company's stock went down and down. And everybody was unhappy because their options were underwater. So later in the year management came back with a proposal that we do another big grant of options. And this time they had a study of their peer companies, showing that the company was just about in the middle on stock performance and earnings performance. And I looked at the numbers and said, "This is baloney. When you've figured earnings here, you've left out that huge charge the company took for our problems this year." Well, they issued the options anyway. It's all pretty depressing.

What's going to happen this year about compensation, generally? I think bonuses will go down--sharply. Companies may award more options to make up the downdraft. They'll say, "I gave good ol' George $2 million in options last year. This year the stock is down 75%, so I'll give him four times as many options." That'll fit what most people want. They say, "You can fiddle with my bonus, but don't cut out my options"--because they know there's the big casino waiting out there.

The speaker is the head of a privately held company.

My views about compensation go back to a brief period in my early life when I worked at a consulting firm and had to do comp work--it's not anything that people volunteer for, or at least I didn't. The joke at this firm was about one company that we got a lot of business from and that, coincidentally or not, had the highest-paid CEO in its industry. And the challenge for our guys every year was, "How do we justify a higher salary for this CEO?"

And then fast-forward to maybe ten years ago, when as a director of a major Fortune 500 company I'm named to the comp committee. This company had several different CEOs during the time I was a director. In my experience, there are few things that CEOs are interested in more than their own compensation. And also it seems that everybody's got his own ideas about comp, or at least that was true in this company, which was not highly institutionalized in terms of structure. So every time a new CEO came on board, there'd be a whole new compensation idea. You jog left, you jog right.

Our view at this company, given that we weren't a spectacular performer in our industry or in terms of management, was to try to keep our people somewhere in the upper half of the compensation spectrum. Since we didn't have world-beating people, the rationale for going higher than that just wasn't present.

Both my consulting days as a kid and my time on this company's comp committee taught me a lot about "in-cen-tive com-pen-sa-tion." What I've come to believe in my dotage is that incentive compensation works fine as long as the people who are incenting have the guts to follow what they say they're going to do--but usually they don't.

An example: We got a new CEO, and he wanted a more modern, competitive comp system. In addition to regular compensation, there was to be a performance-share plan that granted executives stock based on the growth of the company. That was to be midterm compensation. And then there were to be options on top of that.

And I remember saying to the CEO at the time, "Fine, we'll do this. But what you're telling us is that the rules are changed and that you're really going to enforce this." And he said, "Of course, of course. This is a new deal. We're serious. We're going to incent these guys to do a job for the shareholders."

Well, you can imagine what happened. The first year of this CEO we had write-offs. And what he does then is come to the comp committee and talk about all the wonderful things they'd accomplished. And why this guy on his team--why it really wasn't his fault--da-da-da-da-da-da.

So we listened, and we kind of gave him half of what he wanted for his people. We were thinking that the rules had changed and the guys in the organization didn't really understand it--"But you'd better tell them," we said to the CEO. And because he was the one who had proposed this plan, we hit him damn hard in pay right off.

Then the next year, same thing. He had a lot of write-offs and the same line of horse manure. And that year, we hit everybody pretty hard.

So my view of incentive comp of any kind is that it's fine if it isn't just a giveaway program. The pendulum has to swing both ways--and usually it doesn't. A comp committee also hears a lot about external factors, things that couldn't have been anticipated when the budget was being made. People say, "We worked our butts off"--da-da-da-da. And you have to answer, "Look, that was the deal. You agreed to work here for a year under that deal, and if the shareholders get dung, then you get dung."

My view is that the guys at this company were swept along by the general out-of-control executive comp mentality. For the level of sophistication that this company represents, its people were extraordinarily well compensated. A rising tide lifts all boats, and today some very mediocre people are making very nonmediocre income. Or maybe I'm just out of date.

Highly regarded as a CEO, the speaker has served on many boards.

I've had a lot of experience on comp committees. I've seen them run beautifully, when you've had responsible people on the committee and when management, in my opinion, was never aggressively promoting things for themselves.

Once in a good situation like that I voted for something that some people wouldn't think was in the interests of shareholders: At the end of a guy's career, we decided that he'd done such a great job that we gave him a generous option grant. Now most people feel you should only give options as an incentive. But an interesting thing is that good management has a carryover for the future, and of course bad management does too.

The other kind of case you run into on compensation committees is when you have management that is very aggressive financially for itself. I was chairman of a comp committee, and the company's earnings were down dramatically, and there was a relatively new CEO who wanted to get a substantial amount of new options. I wouldn't give him what he wanted, and there were other people on the committee who agreed with me. And very shortly after that, all the people on the board were rotated to new committees. Nobody was told why. I knew why.

I've seen another case where a new CEO got a lot of options when he came. But within months one of his people came to me and said that it would be good to give him more. We said the timing wasn't right. We said the business ought to show some improvement before he got more. A little later, I got the request a second time. I then went to the CEO and said I couldn't do what he wanted, but that if things turned for the better in the business, I'd see that he got the options he was after and even more. And pretty soon the company's performance did improve, and we kept that promise. By the way, he did a superb job. He deserved every dollar.

I don't see the escalation of income and options ending. I guess it's possible the government could take some kind of action. You're not apt to get that with this Administration, but maybe you could with a Democratic Administration. You remember, though, that in the past the government put in limits as to how much money you could pay a chief executive, unless it had some relationship to performance. We've gotten around that beautifully

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: grumbler on February 04, 2019, 01:45:27 pm
Next, let’s talk major US university football coaches, and how their salary compares to players (let alone professors).  :P

Or, we could talk about how the earnings of rap artists compare to those of children in the neonatal intensive care unit.  :lol:
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: dps on February 04, 2019, 02:06:43 pm
I find arguments that boards always protect the interests of shareholders in regard to executive compensation wishful thinking at best.  More like a fantasy.  Here is an article from way back in 2001 which was prophetic about the excesses we now see and the reasons for it.  I have deleted parts of it for brevity.  But it is still a long read and well worth it if you really think the system of executive compensation is just fine.

I thought that it was a well-known fact that executive compensation, especially but not limited to the CEO level, was sort of "rigged" (for lack of a better term) at many corporations.  But I don't see how any article from 2001 can be considered prophetic about the situation, because it had existed for some time by then.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 02:10:54 pm
I find arguments that boards always protect the interests of shareholders in regard to executive compensation wishful thinking at best.  More like a fantasy.  Here is an article from way back in 2001 which was prophetic about the excesses we now see and the reasons for it.  I have deleted parts of it for brevity.  But it is still a long read and well worth it if you really think the system of executive compensation is just fine.

I thought that it was a well-known fact that executive compensation, especially but not limited to the CEO level, was sort of "rigged" (for lack of a better term) at many corporations.  But I don't see how any article from 2001 can be considered prophetic about the situation, because it had existed for some time by then.

Apparently not well known enough given the responses above yours.  In any event, if you read the article you will see that the insiders being interviewed suggested that it would become this bad and that the regulations put in place during the tech boom would not slow exec comp down - comp committees would just adapt to gaming the system even more.  And that is exactly what happened.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: dps on February 04, 2019, 02:16:45 pm

Apparently not well known enough given the responses above yours. 

Well, yeah, clearly.  Those responses surprised me, especially given who posted them.  There are a couple of posters who I might have expected to try to deflect criticism of executive compensation for ideological reasons (I suspect some people would have expect that from me, actually) and a few who I would have expected to be unaware of the situation, but Valmy is usually better informed than a lot of posters and certainly isn't someone who would deflect criticism on the subject for ideological reasons.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 02:40:21 pm
For what it is worth, you have never struck me as someone who ignores facts for ideological purposes.

edit: as far as Valmy goes, he is just stating the party line that most people probably believe.  I am not so sure that most people understand the degree to which comp committees are rigged.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Valmy on February 04, 2019, 03:15:26 pm
Rather I am stating how it is supposed to work  :P

I would hope that getting a good executive is so important and the skills necessary are hard enough to find that high compensation is a justified, if painful, expense. But that might not necessarily be the case.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on February 04, 2019, 03:30:22 pm
To me it’s not obvious why CEOs shouldn’t be paid a lot.  There are a lot of stories about either a skilled CEO adding tens of billions of dollars to the company, or sinking a company for no good reason. 

There are a lot of stories about such things because there are a lot of stories about CEOs.  There are fewer stories about the anonymous team of company scientists that secured key patents or division level managers that screw up their divisions but of course those things happen all the time.

Take the recent Vale accident - there was a big story in the FT about the CEO; no doubt other papers ran similar stories.  You could argue the accident, which is likely to cause Vale billions, shows how important CEOs are.  Problem is the CEO is basically a glorified PR guy who by his own admission was relying on the technical advice of his mine safety engineers. So really the key guy here was the supervising safety engineer - that's the guy that should have gotten the multi-million pay package to make sure the right decisions got made. The Deepwater Horizon disaster is still debated but it's clear that key decisions were made at people several rungs below the CEO spot.  People like that cause billion dollar swings in company valuations all the time.  The CEO is just the face that gets plastered on the news.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: alfred russel on February 04, 2019, 03:33:47 pm
To me it’s not obvious why CEOs shouldn’t be paid a lot.  There are a lot of stories about either a skilled CEO adding tens of billions of dollars to the company, or sinking a company for no good reason. 

There are a lot of stories about such things because there are a lot of stories about CEOs.  There are fewer stories about the anonymous team of company scientists that secured key patents or division level managers that screw up their divisions but of course those things happen all the time.

Take the recent Vale accident - there was a big story in the FT about the CEO; no doubt other papers ran similar stories.  You could argue the accident, which is likely to cause Vale billions, shows how important CEOs are.  Problem is the CEO is basically a glorified PR guy who by his own admission was relying on the technical advice of his mine safety engineers. So really the key guy here was the supervising safety engineer - that's the guy that should have gotten the multi-million pay package to make sure the right decisions got made. The Deepwater Horizon disaster is still debated but it's clear that key decisions were made at people several rungs below the CEO spot.  People like that cause billion dollar swings in company valuations all the time.  The CEO is just the face that gets plastered on the news.

Which comes back to the point I was making about compressing corporate salaries...You want to pay your division heads well? In practical terms you need to pay your CEO a lot more than the division heads.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on February 04, 2019, 03:38:20 pm
In practical terms you need to pay your CEO a lot more than the division heads.

More, yes, but why "a lot" more?  If division head gets 1.00, why isn't it enough for CEO to get 1.50 or 1.25.  Why does it have to be 10+?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 03:39:16 pm
Rather I am stating how it is supposed to work  :P

I would hope that getting a good executive is so important and the skills necessary are hard enough to find that high compensation is a justified, if painful, expense. But that might not necessarily be the case.

I think that is you buying into the party line again.  Why is the CEO so important and why are those skills so hard to find?  spoiler alert - you think that because that is what the echo chamber of the self serving system of compensation for CEOs endlessly repeats.  In reality a CEO is really only as good as the people the CEO depends upon to do the real work.  A good CEO largely stays out of the way lets them get on with it but if they have subpar people doing the work, there is little a CEO can do largely because it would be hard for the CEO to know.

A good argument can be made that it is much more in the interests of the corporation to attract good people throughout the organization rather than to enrich a stratosphere of the executive suite.  But the only people who are going to change that are those inhabiting the executive suite - and why would they ever do that?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: alfred russel on February 04, 2019, 03:49:06 pm
In practical terms you need to pay your CEO a lot more than the division heads.

More, yes, but why "a lot" more?  If division head gets 1.00, why isn't it enough for CEO to get 1.50 or 1.25.  Why does it have to be 10+?

I suspect that a lot of people would rather avoid that 25% or 50% pay increase and avoid being the public face of anger at any number of issues and the fall guy for the big ones. There is often a layer or two of management between a division head and a CEO. There is also a lot shorter career timespan for a CEO; the job gets a lot more pressure.

The counterargument is that the personalities that want to be CEO want the power and prestige, and will take that at any price. That isn't my experience though. I work for a larger company, and was hired 10 years ago by the previous CFO before she rapidly advanced. So I know her rather well, and immediately before she was CFO she was head of accounting and probably making $1.5m. She was all about work and both smart and capable, but I can guarantee you she did not appreciate being in the spotlight. For $2m I'm not sure the value proposition would have been there (I think she started as CFO around $5m or $6m).
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Iormlund on February 04, 2019, 03:49:18 pm
In my [admittedly limited] experience with publicly traded companies, a team of well trained baboons could do better than upper management for a lot less money.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 03:50:27 pm
In practical terms you need to pay your CEO a lot more than the division heads.

More, yes, but why "a lot" more?  If division head gets 1.00, why isn't it enough for CEO to get 1.50 or 1.25.  Why does it have to be 10+?

I suspect that a lot of people would rather avoid that 25% or 50% pay increase and avoid being the public face of anger at any number of issues and the fall guy for the big ones. There is often a layer or two of management between a division head and a CEO. There is also a lot shorter career timespan for a CEO; the job gets a lot more pressure.

The counterargument is that the personalities that want to be CEO want the power and prestige, and will take that at any price. That isn't my experience though. I work for a larger company, and was hired 10 years ago by the previous CFO before she rapidly advanced. So I know her rather well, and immediately before she was CFO she was head of accounting and probably making $1.5m. She was all about work and both smart and capable, but I can guarantee you she did not appreciate being in the spotlight. For $2m I'm not sure the value proposition would have been there (I think she started as CFO around $5m or $6m).

25%?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on February 04, 2019, 03:59:22 pm
I suspect that a lot of people would rather avoid that 25% or 50% pay increase and avoid being the public face of anger at any number of issues and the fall guy for the big ones.

And there are plenty more for each of one those who would crave the publicity and ego stroking, your experience with one person to the contrary notwithstanding.

I take your point that there are pressures associated with the public exposure, but there is a two way causal connection here.  Old schools execs that made Drysdale-Koufax kind of money and wore gray flannel suits didn't attract the same kind of public attention, scrutiny and criticism that new school execs making ARod kind of money do.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: alfred russel on February 04, 2019, 04:11:31 pm
And there are plenty more for each of one those who would crave the publicity and ego stroking, your experience with one person to the contrary notwithstanding.

I take your point that there are pressures associated with the public exposure, but there is a two way causal connection here.  Old schools execs that made Drysdale-Koufax kind of money and wore gray flannel suits didn't attract the same kind of public attention, scrutiny and criticism that new school execs making ARod kind of money do.

Connected with the publicity and ego stroking is the money though...without the $$$, executives are just suckers who spent (and are spending) their lives shilling for a soul less corporation.

The other data point i'll mention is that lifespans in the C-Suite tend to be rather short. The lady I was referring to has retired after 5 years as CFO. I don't know to what extent that was forced, but it isn't a surprise - people don't last forever, either because the board wants to change, or the pressure. So the calculus isn't just: "I make $1.5m now, a 25% increase is nice and brings me to just under $2m, I'll go with that." It is also, "I make $1.5m now and can probably last another 10 years, or go be CFO and probably last 5."
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: PDH on February 04, 2019, 04:17:50 pm
"I make $1.5m now and can probably last another 10 years, or go be CFO and probably last 5."

I would like to make 1.5 million at the University of California, but I am not a coach.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 05:04:26 pm
"I make $1.5m now and can probably last another 10 years, or go be CFO and probably last 5."

I would like to make 1.5 million at the University of California, but I am not a coach.

But how could you possibly bear up under the additional scrutiny of your lectures?
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: dps on February 04, 2019, 05:22:29 pm
Rather I am stating how it is supposed to work  :P

I would hope that getting a good executive is so important and the skills necessary are hard enough to find that high compensation is a justified, if painful, expense. But that might not necessarily be the case.

I think that is you buying into the party line again.  Why is the CEO so important and why are those skills so hard to find?  spoiler alert - you think that because that is what the echo chamber of the self serving system of compensation for CEOs endlessly repeats.  In reality a CEO is really only as good as the people the CEO depends upon to do the real work.  A good CEO largely stays out of the way lets them get on with it but if they have subpar people doing the work, there is little a CEO can do largely because it would be hard for the CEO to know.

I think we may be in danger of over-generalizing a bit here.  There are businesses where every important decision is made by the CEO (let's not get into which decisions are "important") and others where the CEO really nothing more than figureheads.  And of course, not every CEO is outrageously overpaid (and possibly more commonly, in some companies, executives below the CEO level are also outrageously overpaid). 

At the risk of doing some over-generalizing myself, I think that the most important thing most CEO can do is make sure that they have good people in positions below them.  Of course, you are quite correct that in many cases, it would be difficult for the CEO to know whether or not those subordinates are subpar, average, or outstanding.

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 04, 2019, 05:33:18 pm
Rather I am stating how it is supposed to work  :P

I would hope that getting a good executive is so important and the skills necessary are hard enough to find that high compensation is a justified, if painful, expense. But that might not necessarily be the case.

I think that is you buying into the party line again.  Why is the CEO so important and why are those skills so hard to find?  spoiler alert - you think that because that is what the echo chamber of the self serving system of compensation for CEOs endlessly repeats.  In reality a CEO is really only as good as the people the CEO depends upon to do the real work.  A good CEO largely stays out of the way lets them get on with it but if they have subpar people doing the work, there is little a CEO can do largely because it would be hard for the CEO to know.

I think we may be in danger of over-generalizing a bit here.  There are businesses where every important decision is made by the CEO (let's not get into which decisions are "important") and others where the CEO really nothing more than figureheads.  And of course, not every CEO is outrageously overpaid (and possibly more commonly, in some companies, executives below the CEO level are also outrageously overpaid). 

At the risk of doing some over-generalizing myself, I think that the most important thing most CEO can do is make sure that they have good people in positions below them.  Of course, you are quite correct that in many cases, it would be difficult for the CEO to know whether or not those subordinates are subpar, average, or outstanding.

Yeah, certainly there are exceptions.  But I think they really are the outliers.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: DGuller on February 04, 2019, 07:08:14 pm
To me it’s not obvious why CEOs shouldn’t be paid a lot.  There are a lot of stories about either a skilled CEO adding tens of billions of dollars to the company, or sinking a company for no good reason. 

There are a lot of stories about such things because there are a lot of stories about CEOs.  There are fewer stories about the anonymous team of company scientists that secured key patents or division level managers that screw up their divisions but of course those things happen all the time.

Take the recent Vale accident - there was a big story in the FT about the CEO; no doubt other papers ran similar stories.  You could argue the accident, which is likely to cause Vale billions, shows how important CEOs are.  Problem is the CEO is basically a glorified PR guy who by his own admission was relying on the technical advice of his mine safety engineers. So really the key guy here was the supervising safety engineer - that's the guy that should have gotten the multi-million pay package to make sure the right decisions got made. The Deepwater Horizon disaster is still debated but it's clear that key decisions were made at people several rungs below the CEO spot.  People like that cause billion dollar swings in company valuations all the time.  The CEO is just the face that gets plastered on the news.
You can cascade that all the way down the delegation ladder.  Senior managers depend on middle managers, middle managers depend on supervisors, and supervisors depend on grunts.  And yet generally it seems common sense that people higher up on the ladder are regarded as having more marginal impact on company's success, and are therefore paid more than the people reporting to them.

Obviously a truly analytical approach would be to measure expected (not realized) marginal contribution to company returns, and pay a salary proportional to that.  Unfortunately that's impossible, so the argument is going to rest on handwaving as to the exact contribution of each level of management to success.  That said, I highly doubt that all of Apple's engineers would add even a small fraction of a hundreds of billions of dollars of market cap that Steve Jobs brought.  Ultimately CEO is usually the person whose job it is to bring vision to the company and steer everyone below him to effectively get there.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: The Minsky Moment on February 04, 2019, 09:45:42 pm
And yet generally it seems common sense that people higher up on the ladder are regarded as having more marginal impact on company's success, and are therefore paid more than the people reporting to them.

I agree its commonly said but not common sense.  My educated guess is the highest marginal impacts in most organizations are from the people a tier or two below the very top.  The very top of the ladder are full of the Peter Principled, people kicked upstairs to be faces, or people whose best energies and efforts are behind them. To use the sports analogy the most value is found in the 25 year old rising stars, not the 35 year old grizzled vets whose career is topped off with an honorary title and a fat contract.  Exceptions of course, but they are exceptions.

Quote
Steve Jobs

It's was just a matter of time before his name came up, right?  Jobs was not a typical CEO, a typical human being, a typical anything.  He helped made Apple, then almost completely broke it, then launched a couple forgotten lead balloons, then came back and helped make Apple again, and finally died before we could learn what happens next.  Of course other extraordinary people were part of that story, although Jobs deserves credit for bringing some of them in and "motivating" them. What does that all add up to - damned if I know, but it's not a guide to corporate policy more generally.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: dps on February 04, 2019, 10:57:09 pm

It's was just a matter of time before his name came up, right?  Jobs was not a typical CEO, a typical human being, a typical anything.  He helped made Apple, then almost completely broke it, then launched a couple forgotten lead balloons, then came back and helped make Apple again, and finally died before we could learn what happens next.  Of course other extraordinary people were part of that story, although Jobs deserves credit for bringing some of them in and "motivating" them. What does that all add up to - damned if I know, but it's not a guide to corporate policy more generally.

Entrepreneurs/founders in general aren't typical CEOs. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 05, 2019, 10:27:20 am
Entrepreneurs/founders in general aren't typical CEOs.

Correct.  And they also make terrible management.  Which is why, most of the time, when a company goes public or when a large investor comes into a private company, the founders are given a nice big check and are shown the door.  There are of course the outliers, and Jobs is one of them.

I agree its commonly said but not common sense.  My educated guess is the highest marginal impacts in most organizations are from the people a tier or two below the very top.  The very top of the ladder are full of the Peter Principled, people kicked upstairs to be faces, or people whose best energies and efforts are behind them. To use the sports analogy the most value is found in the 25 year old rising stars, not the 35 year old grizzled vets whose career is topped off with an honorary title and a fat contract.  Exceptions of course, but they are exceptions.

That is my experience. 
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: PRC on February 08, 2019, 09:28:49 pm
(https://i.imgur.com/uDJjbSz_d.jpg?maxwidth=640&shape=thumb&fidelity=medium)
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 11, 2019, 02:55:26 pm
 :D

Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Habbaku on February 11, 2019, 03:38:52 pm
Village-burning dragons are Keynesians.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Malthus on February 11, 2019, 03:42:30 pm
Village-burning dragons are Keynesians.

In this universe, it's the 'burnt village fallacy' rather than the 'broken window fallacy'.

Dragons burning villages is not an optimal route to economic health!

https://en.wikipedia.org/wiki/Parable_of_the_broken_window
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Valmy on February 11, 2019, 03:44:12 pm
But...but...all the villagers will have ample work in the building industry!
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Habbaku on February 11, 2019, 03:46:39 pm
Village-burning dragons are Keynesians.

In this universe, it's the 'burnt village fallacy' rather than the 'broken window fallacy'.

Dragons burning villages is not an optimal route to economic health!

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

As long as all the villagers leave the village before it's burned down, Paul Krugman will approve of the dragon's antics.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 11, 2019, 04:08:54 pm
Village-burning dragons are Keynesians.

In this universe, it's the 'burnt village fallacy' rather than the 'broken window fallacy'.

Dragons burning villages is not an optimal route to economic health!

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

As long as all the villagers leave the village before it's burned down, Paul Krugman will approve of the dragon's antics.

I think Krugman would prefer the Dragon paid a 70% tax on all wealth it takes in after the first 10 million gold pieces and a wealth tax on the accumulated horde so that the villagers can build decent infrastructure, rather than the Dragon simply destroying the village.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Habbaku on February 11, 2019, 04:10:30 pm
I bet you're fun at parties.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: crazy canuck on February 11, 2019, 04:29:24 pm
I bet you're fun at parties.


 :D
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: FunkMonk on February 11, 2019, 04:44:40 pm
(https://i.imgur.com/uDJjbSz_d.jpg?maxwidth=640&shape=thumb&fidelity=medium)

Smaug did nothing wrong
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on February 11, 2019, 05:29:41 pm
The towns people are retards.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: grumbler on February 11, 2019, 07:55:03 pm
The towns people are retards.

No, they are not.  They are just written that way.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Maximus on February 13, 2019, 04:02:18 pm
The townspeople aren't even mentioned.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: Admiral Yi on February 13, 2019, 04:18:59 pm
I mentioned them.
Title: Re: What should the marginal tax rate for income over $10 million be?
Post by: viper37 on February 14, 2019, 03:57:07 pm
Dragons burning villages is not an optimal route to economic health!
the builders in the next village will make a ton of money.