Capital in the Twenty-First Century

[Jacob]

Yes but as far as I understand he does invalidate the key unique points of the French book

What are the key unique points?

[Norgy]

I think the growth of internal inequality in most countries isn't possible to just dismiss. There's just a question of how to address it.
We need investment, obviously, so stilfling it would serve no-one. We need enterpreneurs.
But do we need hedge fund managers? Not really.

Tax codes today mostly focus on employees (or "work") being taxed, while capital investments aren't taxed nearly hard enough.

But as soon as this happens, some cnut will just relocate to the Caymans or Cyprus. Remove all tax havens by blunt force.

[Ideologue]

King Cnut?  One of your countrymen I believe.

[Valmy]

I think the growth of internal inequality in most countries isn't possible to just dismiss. There's just a question of how to address it.

Well there is also the question of why it is happening.

[citizen k]

What's The Difference Between Fascism, Communism And Crony-Capitalism?

The essence of crony-capitalism is the merger of state and corporate power--the definition of fascism.

When it comes to the real world, the difference between fascism, communism and crony-capitalism is semantic. Let's start with everyone's favorite hot-word, fascism, which Italian dictator Benito Mussolini defined as "the merger of state and corporate power." In other words, the state and corporate cartels are one system.

Real-world communism, for example as practiced in the People's Republic of China, boils down to protecting a thoroughly corrupt elite and state-owned enterprises (SOEs). The state prohibits anything that threatens the profits (and bribes) of SOEs--for example, taxi-apps that enable consumers to bypass the SOE cab companies.

What A Ban On Taxi Apps In Shanghai Says About China's Economy

    The Chinese mega-city of Shanghai has been cracking down on popular taxi-booking apps, banning their use during rush hour. Until the apps came along, the taxi companies, which are government owned, set the real price for fares and collected about 33 cents each time someone called for a cab. That can add up in a city the size of Shanghai. Wang says the apps bypassed the old system and cut into company revenues.

    Much has been made of China's embrace of capitalism, but — along with transportation — the government still dominates key sectors, including energy, telecommunications and banking. Wang says vested government interests won't give them up easily.

How else to describe this other than the merger of state and corporate power? Any company the state doesn't own operates at the whim of the state.

Now let's turn to the crony-capitalist model of the U.S., Japan, the European Union and various kleptocracies around the globe. For PR purposes, the economies of these nations claim to be capitalist, as in free-market capitalism.

Nothing could be further from the truth: these economies are crony-capitalist systems that protect and enrich elites, insiders and vested interests who the state shields from competition and the law.

The essence of crony-capitalism is of course the merger of state and corporate power. There are two sets of laws, one for the non-elites and one for cronies, and two kinds of capitalism: the free-market variety for small businesses that are unprotected by the state and the crony variety for corporations, cartels and state fiefdoms protected by the state.

Since crony-capitalism is set up to benefit parasitic politicos and their private-sector cartel benefactors, reform is impossible. Even the most obviously beneficial variety of reform--for example, simplifying the 4 million-word U.S. tax code--is politically impossible, regardless of who wins the electoral equivalent of a game show (i.e. Demopublicans vs. Republicrats).

The annual cost of navigating the tax code comes to about $170 billion:

    Since 2001, Congress has enacted about one new change to the tax law per day. Pathetic, isn't it? This tax code is a burden and a fiasco and deeply unpatriotic. As Olson's Taxpayer Advocate Service notes, this code helps tax evaders; hurts ordinary, honest taxpayers; and corrodes trust in our system.

Here's why the tax code will never be simplified: tax breaks are what the parasitic politicos auction off to their crony-capitalist benefactors. Simplify the tax code and you take away the the intrinsically corrupt politicos' primary source of revenue: accepting enormous bribes in exchange for tax breaks for the super-wealthy.

You would also eliminate the livelihood of an entire industry that feeds off the complexities of the tax code. Tax attorneys don't just vote--they constitute a powerful lobby for the Status Quo, even if that Status Quo is rigged, unjust, wasteful, absurd, etc.

It's not that hard to design a simple and fair tax code. Setting aside the thousands of quibbles that benefit one industry or another, it's clear that a consumption-based tax is easier to collect and it promotes production rather than consumption: two good things.

As for a consumption tax being regressive, i.e. punishing low-income households, the solution is very straightforward: exempt real-food groceries (but not snacks, packaged or prepared foods such as fast-food), rent, utilities and local public transportation--the major expenses of low-income households.

1. A 10% consumption tax on everything else would raise about $1.1 trillion, or almost 2/3 of total income tax revenues, not counting payroll taxes (15.3% of all payroll/earned income up to around $113,000 annually, paid half-half by employees and employers), which generate about one-third of all Federal tax revenues and fund the majority of Social Security and a chunk of Medicare.

As for the claim that a 10% consumption tax would kill business--the typical sales tax in California is 9+%, and that hasn't wiped out consumption.

2. The balance could be raised by a progressive tax on unearned income, collected at the source. Most of the income of the super-wealthy is unearned, i.e. dividends, investment income, interest, capital gains, stock options, etc. As a result, a tax on unearned income (above, say, $10,000 annually to enable non-wealthy households to accrue some tax-free investment income) will be a tax on the super-wealthy who collect the vast majority of dividends, interest, capital gains and investment income.

A rough estimate would be 20% of all unearned income.

This would "tax the rich" while leaving all earned income untaxed, other than the payroll tax, which is based on the idea that everyone should pay into a system that secures the income of all workers. This would incentivize productive labor and de-incentivize speculation, rentier skimming, etc.

The corporate tax would be eliminated for several reasons:

1. It is heavily gamed, rewarding the scammers and punishing the honest

2. All income from enterprises is eventually distributed to individuals, who would pay the tax on all unearned investment income.

But such common-sense reform is politically impossible. That's why the answer to the question, what's the the difference between fascism, communism and crony-capitalism is nothing.

http://charleshughsmith.blogspot.com/2014/04/whats-difference-between-fascism.html

[Ideologue]

Since crony-capitalism is set up to benefit parasitic politicos and their private-sector cartel benefactors, reform is impossible. Even the most obviously beneficial variety of reform--for example, simplifying the 4 million-word U.S. tax code--is politically impossible, regardless of who wins the electoral equivalent of a game show (i.e. Demopublicans vs. Republicrats).

I always vote for the Bipartisan Party.

[Norgy]

As for a consumption tax being regressive, i.e. punishing low-income households, the solution is very straightforward: exempt real-food groceries (but not snacks, packaged or prepared foods such as fast-food), rent, utilities and local public transportation--the major expenses of low-income households.

I've been saying that for some time now.
The value-added tax is meaningless these days and if it is to be kept, it should be a targeted tax on unwanted consumption, not your average food, utilities and public transport.

Not a bad piece for someone using blogspot.

[Eddie Teach]

As for a consumption tax being regressive, i.e. punishing low-income households, the solution is very straightforward: exempt real-food groceries (but not snacks, packaged or prepared foods such as fast-food),

So organic veggies and free range meats = tax break, Mickey D's = no tax break and this is supposed to make the tax less regressive? 

[Ideologue]

I'd exempt food entirely.  Go nuts.

[Valmy]

I always vote for the Bipartisan Party.

I back the Crony Corruption Party.

[Eddie Teach]

I'd exempt food entirely.  Go nuts.

Same. I don't know why the author would want to muddle his proposal with Bloomburgesque health Nazism.

[The Minsky Moment]

Here is an analysis heavily dismissing this French guy's thesis:

Tamas, you do realize this is a criticism from the left?  I don't think it means what you seem to think it means, unless you just posted it for general interest.

If so - I am grateful - it is not every day or even every year that one sees in the mainstream a reference to the old Cambridge Capital Controversy, one of my favorite obscure economic puzzles.
But Galbraith doesn't quite get the summary right - it is true that Samuelson conceded the technical point, but the Cantabridgian "victory" was phyrric as the neoclassicals denied the practical significance of the critique and continued on as much before with some minor modification.  Indeed, the Solow Growth model, which Galbraith implied was dead by the late 60s, is in fact virtually canonical - updated versions of it can be found at the heart of most present day macro textbooks for first year grad students.   (in comparison the neo-Ricardian Pasinetti who Galbraith gives a shout out tends to be viewed as a heterodox figure).

I think that Galbraith makes some interesting points and it is cool in an econ-history-geek sort of way he has raised this old controversy, but it is important to understand that Piketty's framework is very much mainstream whereas what Galbraith is talking about is not.

[Norgy]

He's a relative of the J. K. Galbraith, isn't he?

[Sheilbh]

I don't know if it counts as "heavily dismissing", at least not the parts which we have be have been discussing. I'm still digesting it, like Norgy, but it seems that Galbraith disagrees about some of the definitions of capital, and about some of the prescriptions to deal with inequality (the higher marginal tax rate), but not about the fact that economic inequality is growing and returning to pre war levels.

It was interesting. The bit about capital may be the most important issue there. The policy bit seems neither here nor there, Piketty's book isn't being talked about for its policy recommendations, but for its data. The review acknowledges that 'Piketty's further policy views come in two chapters to which the reader is bound to arrive, after almost five hundred pages, a bit worn out.'

Galbraith doesn't seem to question the value of the data, even if he disagrees with points of it. I did wonder if perhaps this was the key section of the review: 'The statement is incorrect. Tax records are not the only available source of good inequality data. In research over twenty years, this reviewer has used payroll records to measure the long-run evolution of inequalities; in a paper published back in 1999, Thomas Ferguson and I tracked such measures for the United States to 1920—and we found roughly the same pattern as Piketty finds now.'

[Jacob]

Galbraith doesn't seem to question the value of the data, even if he disagrees with points of it. I did wonder if perhaps this was the key section of the review: 'The statement is incorrect. Tax records are not the only available source of good inequality data. In research over twenty years, this reviewer has used payroll records to measure the long-run evolution of inequalities; in a paper published back in 1999, Thomas Ferguson and I tracked such measures for the United States to 1920—and we found roughly the same pattern as Piketty finds now.'

Yeah, that passage made it seem like Galbraith was making a play for relevancy by nitpicking and saying "he agrees with me".